This week in financial advice has only gotten crazier with the two major associations announcing they will formally explore a merger.
Commencing what was scheduled to be a joint press conference on Thursday to discuss the Quality of Advice Review proposals paper released on Monday, the Association of Financial Advisers and Financial Planning Association announced they will consult with members in the coming months and ultimately place the merger up for a vote.
It will be dependent on 75 per cent of both membership bases agreeing, but if it goes through, Sarah Abood has already been selected to be chief executive while current AFA CEO Phil Anderson will become the general manager responsible for the transition.
“The boards of the FPA and AFA have agreed in principle to explore a merger of the two associations with the aim of achieving a single united voice for the profession,” FPA chair David Sharpe said.
More joint sessions are planned in the coming weeks for members to hear about the proposal and provide feedback. Additionally, both associations will offer member prices to the other associations members for their respective national conferences.
“Coming together will no doubt strengthen our voice to stakeholders and significantly increase the likelihood of achieving crucial advocacy positions, which is vitally important to members of both organisations,” AFA national president Sam Perera said.
Both associations have been well-known for conducting joint advocacy for the industry, including its most recent collaboration as part of the Joint Association Working Group with 10 other groups for a submission to the advice review.
There will be a transition board for almost three years which will include eight directors from the FPA and four from the AFA.
The FPA will nominate a chair, while the AFA will name the deputy chair and this will last until November 2025.
“After that all eligible members of the merged entity can stand for election,” Perrera said.
Old school lessons
Both boards have proposed CFP being the primary designation, with the AFA’s designations essentially being phased out.
The Fellow Chartered Financial Practitioner (FChFP) and the Chartered Life Practitioner (ChLP) designations previously offered by the AFA will continue to be recognised, but not available to new applicants.
Anderson said there are very few people currently in the process of completing the AFA’s professional designations because of the education reforms.
“We would ultimately need to re-invest in those [to continue offering it], so the decision is made to continue to recognise those who’ve already done it.”
FPA membership numbers are being audited currently which is done at the start of the financial year, but last year’s annual report stated there were 12,049 members.
Abood noted there are several hundred overlapping members, and the hope is the non-overlapping members will see the benefit of the merger.
“The combined association will have a very substantial proportion of the advisers on the [ASIC financial adviser register],” Abood said.
Anderson noted the overall market has declined from 28,000 advisers at the start of 2019 to 16,400.
“It’s impacted the AFA as much as it has any other association,” Anderson said, clarifying the AFA’s membership base is around 3,200 which includes 2,500 practitioners. “This is an important initiative… and provides the opportunity for a merged entity to speak with a much stronger voice.”
Perera joked about the industry being notoriously slow when it comes to making significant changes which all parties are hoping to avoid during the process of the merger.
“We’ve been quietly working away behind the scenes, and we think once we consult with members and get their feedback… we should be able to get a swift outcome and get moving,” Perera said.
Scale and consolidation
With a shrinking industry, consolidating redundancies has been the trend and if the merger goes ahead the AFA and FPA won’t be the first associations to have done so.
The Advisers Association and the Authorised Representatives Association announced their merger at the end of June, placing all three AMP associations into one entity.
Bucking the trend is the Council of Australia Life Insurers which has been formed by the life insurance product manufacturers in the Financial Services Council.
A merger between the FPA and AFA has often been speculated in the industry, but the typical response has always been it will come down to members interests.