Infighting between financial planning industry and professional associations has kicked off again with the Association of Independently Owned Financial Professionals (AIOFP) directly attacking both the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA), along with the Financial Services Council (FSC) for being “institutionally aligned” and therefore not representing the interests of financial planners.
The AIOFP is urging its members to take on Australia’s politicians with a letter-writing campaign, and is pinning its hopes on the claim that Assistant Treasurer Josh Frydenberg’s office “recently confirmed that the FRC/AFA/FPA Risk Framework proposal will need cabinet approval before any further market announcements are made”.
The AIOFP sees a window of opportunity and is urging its members to go through it. In a message to its members, the association says it has “a planned three-stage offensive [see box] under the ‘Battle For Fairness’ strategy”.
We’re watching a political arm wrestle between associations with differing views and competing agendas. Financial services is riven by such divisions and turf wars and these, along and the problems they create for the industry when dealing with government, are examined in detail in the September edition of Professional Planner.
A cacophony of voices representing different segments and sectional interests of the financial planning community – not all equally well informed, nor necessarily driven by public-interest motivations – can make it difficult for government to perceive a clear “industry position” on issues, leading to less-than-optimal legislative solutions.
Competition between associations is good – financial planners deserve to be represented by vibrant, enthusiastic associations – but skirmishes such as this latest one have the potential to damage the standing of financial planning more broadly if the players are not careful.
Professional association v association of professionals
Whatever the merits or otherwise of AIOFP’s stance and its planned actions, there’s an aspect of the association’s stance against the other associations that caught Professional Planner’s eye. AIOFP recently changed its name to include the word “professionals” in place of “planners”. It’s worth pointing out – again – that there is a difference between a professional association and an association of professionals.
As its new name makes clear, the AIOFP is the an association of professionals. It is not, and cannot be, a professional association. That is because its own website says: “The AIOFP’s founding objectives were to further the commercial interests of members and stand by them when required, these have not changed.” No association whose primary objective is the enrichment of its own members can be a professional association. It’s as simple as that.
Therefore, the members of the AIOFP must be “professionals” by virtue of their membership of some other association. That means they have already to belong to a professional association – such as, for example, the “institutionally aligned” FPA. There’s a certain irony in that.
You can be a professional if you’re a member of another professional association – say, CPA Australia, the Institute of Chartered Accountants in Australia and New Zealand (ICAANZ), Actuaries Institute, and so on – but in the financial planning space, as things stand, the FPA is the main game.
The AIOFP is playing a courageous political game by actively discrediting an association from which some of its own members might derive their professional status. It’s playing a disingenuous game, too: It claims that the Life Insurance Framework negotiations were “hijacked” by the AFA, FPA and FSC; yet if its own members are also members of the FPA, or of the AFA, then it’s difficult to see how it can claim this.
The AIOFP blasts the institutional alignment of the FPA, AFA and FSC. In the case of the FSC, fair enough – it is clearly aligned with institutions: its membership is largely institutional. In the case of the AFA, OK – it relies heavily on institutional financial backing and it’s difficult to see how it can sustain itself solely on fees paid by individual members when, according to senate inquiry testimony, it has something like only 2300 individual members. But the FPA is a different kettle of fish and to characterise it as “institutionally aligned” is a bit mischievous.
FPA members – including those who are members of the AIOFP – will recall that in 2011 they voted to abolish institutional membership of the association. From that time on, institutions were removed from the structure of the association and lost the right to vote, and the FPA became a member-only association. And it should also be noted that for at least the past 12 months it has been financially self-sufficient, funding its operations entirely from fees paid by members.
Perhaps the AIOFP means that if a the majority of individual FPA members are authorised representatives of licensees owned by institutions, the FPA itself must be “institutionally aligned”. If that’s so, then it clearly doesn’t think very much of FPA members’ ability to think and act for themselves. Those financial planners can speak for themselves, but if Professional Planner were one of them it wouldn’t be happy with that suggestion.
Back to the current stoush
Anyway, back to the current stoush.
“In what can only be described as ‘political spin’, both the FPA and AFA have recently used third parties to suggest that advisers are now accepting the [Life Insurance Framework] proposal, supporting it and moving on,” the AIOFP says.
“What utter trash and arrogance, the advisers are not happy and we intend on doing something about it.
“It seems the AFA/FPA are still trying to justify their actions by suggesting that we could be a worse off if the Government accepted David Murray’s FSI recommendations. Let’s just keep in mind these ‘Enquiry [sic] recommendations’ are traditionally pre-determined to meet an objective (which clearly seems to be the case with this issue), are largely left on the shelf (ie Henry Report) and the Government does not control the Senate to enforce them.
“As previously suggested, this points to a ‘good cop, bad cop’ political game designed to intimidate us into accepting a fate that others have chosen for us. The AIOFP Board and its members does not accept this position and are determined to do something about it – but we need your support.”
Good on the AIOFP. If its current campaign is what its members want it to do, then more power to it. Diversity of opinion is an undeniably good thing, and the association gives a voice to its members on issues they consider important.
But let’s have transparency and clarity around motivations and objectives. And let’s not muddy the debate or distract from the issues through ill-founded infighting.
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