While the Association of Financial Advisers has continued to remain financially solvent, a 30 per cent reduction in members and an almost halving of revenue has meant the merger writing has been on the wall for a while.
The AFA and the Financial Planning Association announced at the start of the month it will consult members on the merger which will require both membership bases to achieve a 75 per cent vote ‘yes’ vote.
According to figures released by the AFA in a presentation to members, membership has declined by nearly 30 per cent since its peak, although overall adviser numbers have declined by well over 40 per cent.
In FY19 it had a membership of 4,269 which has decreased to 3,292 in the most recent financial year.
Speaking to members, AFA chief executive Phil Anderson said member numbers have been declining which would not be a surprise to anyone given the shrinking of the overall market.
“The overall market has declined from 28,800 from the beginning of 2019 to 16,300, but as we roll into October and the 500 advisers who qualified for the exam extension but have not been able to pass, when they come off the register, the number will be down to 15,800,” he said, referring to the October deadline for the adviser exam extension.
“That will take the decline past 45 per cent and the projections are that number will go down lower.”
Sliding revenue
Revenue has dived from $5.37 million in FY19 to $2.81 million and Anderson acknowledged this has been a substantial fall.
However, he noted there hasn’t been face-to-face conferences during the last couple of financial years which is normally a driver of revenue.
“But nonetheless you can see income has continued to fall over the course of the last four years,” Anderson said. “That decline in income is a result of the decline of member numbers, but it’s also incorporated a decline in the level of support we get from our partner program.”
Anderson made it clear the AFA is still solvent despite industry rumours to the contrary.
“The AFA is still solvent and importantly we do have the AFA investment fund that was intended for a rainy day,” he said referring to the $3 million AFA Investment Fund.
The drop income has impacted the way the organisation has run which has included reducing staffing numbers from 14 in FY19 to nine currently and cutting back services provided by the association.
“We have needed to make changes to come to terms in the reduction of income and that has meant changing our resourcing and consolidating roles,” Anderson said.
Change of direction
Sam Perera said over the last few years the board has spent significant time reviewing the associations business model in the context of the declining adviser market.
“The need for advocacy has never been greater,” Perera said. “We’ve looked at alternative resource options for the AFA, we’ve canvassed different business, but we’ve been back to the drawing board looking at our business model searching for the optimal way to serve our members.”
The new association will have a new name, logo and brand which both said will “reflect the heritage” of the AFA and the FPA.
“This is going to be a new association with its own identity, taking on the great features of the two organisations that will come together as part of this should members approve the merger,” Anderson said.
