The stoush that broke out within the Association of Financial Advisers (AFA) this week highlights the balancing act representative associations play in looking after their members while having a say in the development of public policy.
It’s an opportunity to reflect for a moment on what that role should be – as opposed to what that role often is, or what an association’s members believe or would like the role to be.
You can divide into two main, very broad types, the many and varied associations that represent the spectrum of financial advisers and planners.
First, there are associations that represent the interests of members themselves – their commercial interests, business interest and so on. And second, there are the associations that represent the public interest first, and everything else after that.
Both types of associations have a valid and important role to play, and there’s all sorts of interests that have to be considered when it comes to creating the rules and regulations by which financial services and products are produced and sold.
But as we’ve seen this week, problems arise when the primary objective of an association is at odds with what its members think it is, or what they think it should be.
There’s an element of that in the Life Insurance Consumer Group (LICG) move this week to call an extraordinary general meeting (EGM) of the AFA to address dissatisfaction by members of the LICG has with the leadership of the AFA.
There’s some history to this dispute, and some nuanced arguments along the way, but in a nutshell the LICG thinks the interests of advisers have been ignored or overlooked by the AFA through its apparent compliance with the demands of life insurance product manufacturers, as represented by the Financial Services Council (FSC) in developing the details of the Life Insurance Framework (LIF).
LICG ‘angry’
The AFA, FSC, the Financial Planning Association (FPA) and others were closely involved in lobbying government over the structure and application of the LIF. The LICG objects strongly to elements of the LIF that it says will undermine the ability of risk advisers to do their jobs effectively – to provide good advice to consumers – and place the viability of their businesses at risk (no pun intended). And it’s angry that the AFA didn’t do a better job of representing its members’ interests on the issues.
All of that is absolutely fine, as far as it goes, and it’s the prerogative of any association to represent whomever it pleases. But the LICG’s call to action conflates the interests of its members with the interests of consumers, with a flavour of the public interest thrown in.
The LICG describes the current situation as “an appalling state of affairs for an organisation that purports to represent its members and the public interest,” and in so doing puts its finger on the very conflict that associations often face.
On the one hand, a professional association must put the public interest first. On the other hand, if it has a sizeable rump of membership focused on their own wellbeing, it faces the task of reconciling what might be irreconcilable demands. If an association’s own members are not 100 per cent clear about the association’s priorities, objectives and views, it can create significant friction, as we’re now seeing.
‘Unpalatable’ to members
If any professional association concludes that the public interest is best served by the reforms embodied in the LIF, then it’s those reforms it should support. Its members’ interests are secondary. That’s unpalatable to members, perhaps, but that’s how it is. That’s why being a professional association – and being a professional – can sometimes make life uncomfortable. It’s a test of all concerned.
The benefit to the members of a profession and a professional association is that a profession creates a clearing of trust and confidence in which the public is more likely to use the services of the members of a profession. Their privilege is then to be allowed to create commercial and business structures that enable them to fulfill professional responsibilities while delivering value-added services.
It may be that an alternative to lobbying for changes to the AFA constitution is for LICG members who are unhappy with the AFA to simply quit the AFA and run their own race under another banner. It muddies the water when an association’s membership asks the association to put their interests first, or to serve the public interest and members’ interests simultaneously. Sometimes you simply can’t do both.
For a professional association, when push comes to shove, there can be only be one winner in that contest.
