Here’s a quick quiz.
In whose interests should a professional association act, in the first instance?
- a) The association’s members
- b) The clients of the association’s members
- c) The public interest
- d) The association’s chief executive
- e) The association’s sponsors and other sources of funding
If you answered c), then you can stop reading now. You get it. Enjoy the rest of your day. But if you answered anything else, and especially if you answered a), buckle up – this might be a bumpy ride for you.
With new ethical and professional standards for financial advisers fast approaching, it’s a worry that these sorts of questions even have to be asked. It’s a worry that the answer to the question is still frequently wrong, and that the message isn’t getting through about what a profession is. And it’s a worry that ‘professional’ associations still think it’s OK that they exist to advance the interests of their members.
It’s tempting to tune out when this subject comes up, but right now it’s important to know what a professional association is and what one isn’t. Not knowing the difference could cost your livelihood.
Professional associations – professions, in general – exist to serve the public interest, first and foremost. Any benefit to members of a professional association derives from this duty.
An association is not a professional association if its priority is to serve its members’ interests, or the interests of its chief executive (or its management and staff), or anything but the public interest. If it does any of those things, then it’s an industry association or, more accurately, a lobby group. Such groups, by definition, put self-interest ahead of the public interest.
The Association of Independently Owned Financial Professionals (AIOFP)* website states that one of its main objectives is to advance the commercial interests of its members. On a public website, if the public interest isn’t listed among the objectives, it can be concluded that serving the public interest isn’t one of those objectives.
To be clear, that’s fine. Lobby groups and industry groups have an important role to play. But let’s not confuse them with professional associations. If you’re a member of an industry or lobby group, you’ll also need to be a member of another association – a professional one.
This week it was reported that the AIOFP has amended its constitution so it can be recognised by the Tax Practitioners Board as (a bit confusingly) an “industry professional association”. Financial planners must be registered as tax (financial) advisers so they can provide tax advice to clients, and being a member of an association the TPB recognises can make registration simpler. To be recognised, an association has to meet the requirements of the Tax Agent Services Regulations 2009 (TASR).
The Financial Planning Association (FPA), the SMSF Association and the Association of Financial Advisers (AFA) are already recognised professional associations. Clearly, it’s going to take the AIOFP time and a lot of money to get there.
Setting up and operating an independent, fair and transparent disciplinary process isn’t cheap, and AIOFP’s own members will foot the bill.
(The report about AIOFP’s plans went on to state that the association believes the changes are important to “ensure the association can act in its members’ best interests”. If you’re going to run a disciplinary process and deal with complaints from the public against your members, it’s probably not best that you go into it saying you’ll be acting in your members’ interests.)
Any association can structure itself so membership is open only to individuals and abolish corporate membership.
It can ensure funding comes only from its members, so that it has no ties to – and therefore no conflicts of interest arising from – other sources of funding – particularly product manufacturers, but other service providers as well.
It can set up, operate and fund a disciplinary process to sanction or expel members.
It can also provide support to members through education, professional development, conferences and other things.
But all of the above is a complete waste of time – and a waste of members’ money – if the ultimate purpose of the association is to serve its members’ interests.
It’s also downright dangerous to members who mistakenly believe they belong to a professional association when in fact they do not. Too many financial planners just are not getting the message that belonging to the right sort of association is really, really important. It could mean the difference between being allowed to continue to practice, and being barred.
Yes, wrongly thinking you belong to a genuine professional association could be fatal to your livelihood. That’s hardly in your best interests. It’s not in your clients’ interests. Arguably, it might be in the public interest if it weeds out advisers who aren’t smart enough or don’t care enough to know the difference.
Think carefully, put these questions to the executive of the association to which you belong, and satisfy yourself that if the new professional standards came into effect today, you’d still be allowed to turn up for work on Monday.
Financial Planning Academics Forum today
Today Professional Planner is attending the Financial Planning Academics Forum (FPAF), this year at the University of Wollongong. This is an annual event where leading academics in the financial planning sphere meet to discuss their work and research.
Some smart insights emerge.
Last year, for example, Angelique McInnes presented preliminary work on financial planners’ understanding of the term ‘independence’, and its impact on the legitimacy of adviser licensing. That early insight informs some of the re-examination of the licensing regime for financial planners now taking place.
Professionalism, specifically the new professional standards legislation, is central to today’s FPAF agenda. And it should be central to every entity that wants to play a role as a professional association for financial planners.
| The AIOFP responds:
Just in case you misread our website, we state we will act in the BEST INTERESTS of our members and their clients [ie the public]. With issues not directly related to consumers, ie LIF manipulations, we act in the best interests of our members unlike others who sort their views and literally shafted them. The spirit of FOFA demands everyone should be acting in the best interests of the public, this theme transgresses into the operation of an Association. But it should also be noted that not all activities of an Association are consumer related. With issues that are not related to consumers, we will unashamedly act in our members best interests, that will not change. We are requesting you print this response to add balance to your article. |
* Note: this article was edited on 26/6/17 to include a response from the AIOFP
