We live in a society and an economy where competition is regarded as a good thing, improving the quality of goods and the standard of services. In the world of professional associations, it’s really no different. Witness the accounting profession, which is well served by multiple associations.
If the recommendations of a Parliamentary Joint Committee (PJC) inquiry into professional, ethical and education standards in financial planning are adopted, all financial planners will have to be members of a professional association. And the PJC has set out quite clearly what it believes a professional association looks like, and what it can do.
For the 2700-member Association of Financial Advisers (AFA) that creates challenges on several fonts – not least of which are its size, and its current structure.
The chief executive officer of the AFA, Brad Fox, says he welcomes competition among professional associations, and says the AFA will do whatever it takes to change and adapt to the new regime.
Appropriate for the times
“The simple summary is that we’re committed to being a professional body that’s appropriate for the times,” Fox says.
“As a 69-year-old body, we’ve changed and evolved several times. The next wave of that evolution looks like it’s at our doorstep now, and we’ll step through. We’ll step through it quite happily.
“We’ve done it before, a number of times.”
That willingness to evolve will include ditching corporate membership, if need be, Fox says.
The PJC was pretty clear that only associations that have no corporate members and which are approved by the Professional Standards Councils (PSC) can be involved in the proposed Finance Professionals’ Education Council (FPEC). FPEC is a body it is envisaged will set professional standards for financial planners. If the AFA fails to achieve a place at FPEC, financial planners who are members only of the AFA will be disenfranchised from the process of setting the very standards they will be held accountable to.
Overplayed
“The corporate membership debate is quite overplayed. I’ll say that, first of all,” Fox says.
“For example, if we have a large product manufacturer as a corporate partner, the number of memberships they get as part of that deal could not persuade a vote on anything.
“It’s about the notional structure of how they fit in as being recognised as being part of the AFA – that’s what the membership is all about.
“If we have to take away that membership, or take away voting rights attached to that membership, that’s not a significant issue at all for us. It can be done in our by-laws, by the board. It doesn’t need to go to the members. In fact, we made a similar change late last year before we submitted our Tax Practitioners Board [TPB] application, because we had a class of members called associates – for example, I am an associate member now, I’m not a practising adviser – and up until late last year they had a vote with the AFA, and now they don’t.
“So it affected a small number of just over 100 individuals. And we made that change because we needed to get through the TPB process. We’ve had no problems with that at all.”
If membership of a professional association is effectively mandated, as per the PJC suggestions, then Fox says the AFA is prepared for an influx of members
“We’re approaching somewhere around 2600 or 2700 members, most of which are advisers,” he says.
Size isn’t everything
“Size isn’t the most relevant thing. It’s about your ability to be effective and to carry out the responsibilities under whatever framework it is you subscribe to. As mandated membership comes into play, advisers will make a choice on which body they’ll join, assuming that they haven’t yet joined one. We know that getting close to half of advisers haven’t.
“And if they choose the AFA as their association of choice, we will grow significantly. If we go from the sort of numbers we are now to 4000, 5000, whatever the number is, it gives us greater resources to put back into our membership – and of course that would be required, because stepping up to the PSC regime would require a lot more in terms of proactive monitoring of members as opposed to the reactive monitoring of members that we have now.
“I don’t think that most people know that the AFA has had a code of ethics and a disciplinary procedures in place for decades, and we use it. But we’ve had absolutely minimal case to use it. We’ve had two complains about our members since the GFC.”
As the ground shifts and the occupation of financial planning continues to evolve towards being a profession, Fox says the messaging from the AFA to its members will not need to change much at all.
“We’ve been talking to advisers about the need to invest in yourself and conduct yourself professionally at every interaction with a client,” he says.
Culture stays the same
“That part doesn’t change. The cultural elements of driving people to be their best is the same.
“But what these changes are demanding are clear public symbols that there’s been change. Education standards is one [we] have talked about before. Education standards, having a degree, is a clear symbol the public understands. It doesn’t necessarily make for a better adviser, but it does provide a clear symbol of people having passed a higher standard of education and therefore should have subject-matter expertise.
“When we look at the Professional Standards Councils, I would say until the PJC report came out, less than 5 or 10 per cent of people around financial services had any awareness of it. So this is a new thing for people to consider, but it’s really about, if we go that path it aligns us more tightly to the other recognised advice and service professions.
“Therefore, that ought to be a symbol or a sign that the public can more easily digest or understand – that financial advice has moved in to a new space.”
