Whenever members of a particular pastime, be that an occupation or a hobby, get together, it is natural for them to discuss their common interest and endeavour to assist one another in improving their performance at this common pursuit.
Invariably, these groups elect to create a formal entity of which they can all become members, paying subscriptions to join this new club to fund the provision of facilities and resources to make their participation more enjoyable and rewarding.
The benefits of the creation of a forum for such exchange of ideas and information are both plentiful and obvious. It makes perfect sense to tap into the intellectual property of a colleague in order to “short cut” the process of acquiring the necessary knowledge to improve your performance in the pursuit in question.
When the common interest constitutes an occupation, the “club” becomes a union or an industry association.
It also makes sense for such a body to formulate policy to represent the interests of its members in matters relating to employment conditions, government regulation and other similar issues. This, in turn, leads to these bodies playing a significant role in lobbying the government, employers and regulators to represent the interests of its members. This is often perceived as one of the most significant advantages of belonging to such a group.
Back in the middle to late last century, at a time before the terms “financial adviser” and “financial planner” were in common use, groups of industry practitioners formed together for the reasons outlined above.
One of the first of these was the Life Underwriters’ Association, or LUA, as it was then known. Although somewhat of a misnomer – given that its membership consisted of life insurance “agents”, as distinct from underwriters – this group was, up until the early to mid-90’s, the pre-eminent representative body for those practicing the discipline of offering financial advice, notwithstanding that it was primarily based on the sale of life insurance company products.
In the 1980’s, two bodies formed to represent the interests of practitioners in the field of investment advice. First came the Association of Independent Professional Advisors (AIPA), which was later followed by the formation of an Australian chapter of the International Association of Financial Planning (IAFP). In 1992, these two bodies merged to create the Financial Planning Association (FPA).
Later, the curiously named Association of Independently Owned Financial Professionals was formed (curious because we assume it is their employers, and not the advisers, that are independently owned), ostensibly to provide an association for practitioners not employed in businesses owned or controlled by financial institutions.
In 1996, what was originally the LUA changed its name to the Association of Financial Advisers (AFA) and today, it is these three institutions that are the primary bodies representing the majority of those practising the discipline of dispensing financial advice.
Up until this point, the objectives of all three bodies were similar in that their primary function was to represent the interests of their constituents.
However, all of that changed when the members of these three groups (and, bear in mind, some practitioners are members of more than one of them) began to lay claim to the mantle of “professional”.
Once this factor became part of the mix, it was no longer appropriate for these groups to put their members’ interests foremost. This is because, by definition, a professional conducts themselves in a manner that puts the interests of their clients ahead of theirs.
Of necessity, this effectively forced these associations to make the transition from industry representative bodies to professional associations. This, in turn, necessitated the creation of a professional code of conduct to which members of these associations are expected to adhere. To be recognised as professional associations, these bodies need to enforce adherence to these codes of conduct. In turn, industry participants wishing to lay claim to the descriptor “professional’ are almost forced, in the absence of any regime controlled by the regulators, to become members of one of these professional bodies. Whether or not, we, or they, like it, this is now the “way of the world”.
We have seen massive disruption in the financial services industry for quite some time now, and it shows little sign of letting up. Notwithstanding that this upheaval has caused a not insignificant level of unrest and dissatisfaction among the membership of each of these groups, belonging to one, or more, is, for all intents and purposes, a literal “ticket to the game” as a financial professional in this day and age.
With the differences between them more historical than actual, and mostly subtle, it is a decision for the individual practitioner as to the professional body to which they choose to align themselves.
If you choose none, good luck going it alone!
Wayne Leggett is principal of Paramount Wealth Management, a member of the FPA and a former national president of the AFA
Thanks for the history lesson, Wayne. I’m sure those with less than 20 years as advisers will have gained a better perspective, but for those of us who’ve been doing this for more than 3 decades (I was the Chair of the WA branch of the AIPA in 1988) the point of these associations is a little more moot. I have not been a member of any since the day we formed the FPA and its FIRST action was to start taking a series of donations/bribes/”sponsorships” from the fund managers – effectively handing them the power to direct us and by default, removing any hope of “independence” either in the eyes of the public or the regulators. ASIC still distrusts our “professionalism” because many of us got paid by those same fun managers for so long that it (ASIC) reckons we see them (the fundies) as our colleagues rather than as people we may need to protect our clients from…and they’d be right! I became totally independent as soon as I stopped having partners and charged ONLY fees for my services and accepted no commissions. more than a decade ago I formed my own business with its own AFSL so that I was not even associated with anyone else – because you can’t control others, only yourself. Every adviser could (and I’d argue, should) get their own AFSL and run their own business according to their own (higher) ethical standards and stand or fall by them. Our various associations are all tarred with a similar brush and the public know nothing of them other than that their members regularly get “pinged” by ASIC for crimes or misdemeanors ranging from theft to faulty SoAs so there’s no badge of quality in any association. Even the CPA name is tarnished these days… I’ll stick to going it alone, thanks, Wayne. My clients know that this business is NOT about trust, it’s about transparency. Trust is what you feel for mummy. Transparency is what grown-ups want in their business dealings. Associations don’t add any credibility other than to those used to dealing only with large corporations – and that includes governments of all persuasions. But for those of us who lead rather than follow, government is there to be led, too. Adhering to best practice with total transparency leads to happy clients, reasonable (but not huge) profits and no complaints.
Well said. 100% right. One could easily add that the FPA/AFA lobbying the Govt/ treasury is actually harming financial planners, the industry and consumers and is detrimental to us. What’s frustrating is the current head of the FPA claims to be independent and yet like you said, the association gets payment from fund managers and interesting relationship.
These are no longer “professional associations” they are just cartel leverage in the pocket of the instos. A complete waste of time being a member of the AFA or FPA if you are non-aligned.
If only we could divorce ourselves from the clammy hands of the insurers and fund managers and their membership deals. The FSC effectively have us by the shorts !
they got us by the balls and are squeezing the life blood out of us until we leave which we will in droves beginning 1 Jan 2018
IFA – The Association of Empty Cans
You left out the last chapter. It goes like this. They attempted to become a professional association but failed. Over time they were taken over by AMP and Bank planners. Today these so-called professional associations, in name only, just represent the voice of the big banks and fund managers. Getting large payments from product manufacturers, offering discounts based on your employer, and finally attempting to formulate legislation whilst having this conflicted payment structure all resulted in their eventual downfall. In 2018 the CEO of the FPA was banned from the industry after claiming to be independent, whilst negotiating for the FPA a $60K cheque from AMP. Today the FPA and AFA have renamed themselves the Association of AMP and Bank Advisers and when the Government wants an opinion of these companies they simply turn to the FPA.
Agree wholeheartedly. Wayne. Been a member for over 20 years but lost interest in belonging to this club Wayne and if the only reason is so I’m not lonely that’s a pretty poor reason to join in the first part. I’ve never joined to find friends Wayne, I joined because I wanted to help make financial planning a profession and receive all the benefits that entails. But have been bitterly let down by the unprofessional behavior of these organizations. Both these associations have lost there way as illustrated by there stance on CBA scandals, Independence meaning, LIF, and payments from banks.
Well done Wayne on your summary of our profession’s evolution.
There are subtle differences to the associations which represent either a business model or the practice standards of a financial planner. All associations have their role and find common ground to influence government policy. I’m a member of the FPA.
One association left off the list is the Boutique Financial Planning Principals’ Group (BFPPG) which was formed in April 2002 as a self help group for financial planners who held their own AFS Licence. I was one of the original members. The membership grew out of frustration due to the new licensing regime introduced in 2001. There was no association representing our “self licence business model”, and the new Corps Act 2001 made sure we were marginalised in every respect.
Lots of great work put in by the Executive of the BFPPG made life a bit more tolerable, and lobbying for changes to legislation made sure our business model could succeed along side the big corporates.
I say pick a side, and join the club because life is pretty lonely as a financial planner and business owner without the support of some of best that I have met in my 30 years in the profession.
Thank you Wayne for the article.
I really enjoyed the LUA and the courses they provided when I started in the industry.