Collins - Is it time for a new association?

On just about any criteria, the Financial Planning Association (FPA) has been a very successful trade and professional association. In little over ten years, it has put financial planning on the map in Australia; has the ear of Government and the regulator; and has established the Certified Financial Planner (CFP) mark.

On just about any criteria, the Financial Planning Association (FPA) has been a very successful trade and professional association. In little over ten years, it has put financial planning on the map in Australia; has the ear of Government and the regulator; and has established the Certified Financial Planner (CFP) mark.

This has happened, in the main, because many far-sighted, hard working members made it happen. But it has happened also, in part, because other trade and professional associations were too busy protecting the status quo — they did not move with the times or the with the needs of consumers.

The astute reader will have noticed that I used the past tense “has been” when referring to the success of the FPA in the first sentence of this article. That was deliberate. The FPA’s halcyon days may indeed have passed. The other trade and professional associations have woken up and CLERP 6 is set to change the industry. But the important question now arises: will the FPA successful work its way through the many issues that it now faces? Of these issues, the one I want to discuss in this article is the CFP designation.

In my view, the FPA has got itself into a real muddle with the CFP designation. Some of this has been caused by our unique two-tiered regulatory structure in Australia but much has been caused by some members of the FPA being elitist.

This muddle will continue until the following issues are resolved.

Firstly, is a financial planner a provider of a holistic service (a GP) or a specialist? Why will you need to have the CFP designation to be a practitioner member of the FPA? Can only CFPs do financial planning? Why does the CFP designation need to be tied to FPA membership? Does one designation fit all?

One interpretation of the above is to see the CFP designation as being the minimum requirement of a financial planner — at least in the eyes of the FPA. This raises numerous more questions, but in particular the following two. Why can a member be a CFP and not be a practising financial planner? Will CFPs ultimately try to differentiate themselves?

As a result of CLERP 6, there is going to be a lot more “advisers” from a broad range of backgrounds. Some will come from general insurance, others from superannuation, life insurance and banking. How relevant will these advisers see the CFP designation to their situation, and especially if they have to join the FPA to obtain it. The Securities Institute and the accounting bodies have put, or are putting, in place alternate designations.

The real danger for the FPA (and the CFP) is that it could easily be sidelined over coming years. If the FPA continues to protect and promote the CFP mark as it does now, it is challenging other associations to develop and market their own designations. If this does happen, there will be no real winners, the FPA could be the penultimate loser, second only to consumers.

Last year, when the FPA was in discussions with the accounting bodies, one of the associations asked if they could have access to the CFP designation for their members. The FPA declined.

In Canada, a number of associations share the CFP designation. In the USA, although the FPA and ICFP have merged to become the FPA, you still have the Certified Financial Planner Board of Standards that oversees and markets the CFP designation.

The FPA has to decide what it wants to do with the CFP. Does it want to retain the CFP designation exclusively or share it with other associations? If it does decide to retain it exclusively, does it court exclusive irrelevance? Will it be able to match the power and the resources of other associations? Will its membership decline as members are wooed by the other associations? Or should it try to find a way to have the CFP designation accepted as “the” mark for financial planning?

One way to make the CFP mark the designation of choice for financial planners would be for the FPA to set up a separate organisation to oversee and market the CFP designation in Australia. Other associations could be invited to join the new body. This new body would purely be a professional standards body. This suggestion will upset some FPA members. Some will be upset because they see the FPA as an all-encompassing association. My response to them is that this suggestion would enhance that position rather than dilute it.

The FPA would be free to promote financial planning and the interests of all of its members. As it stands, there is tension between some CFP members and others, especially some of the principals. Once again, the direction of the marketing campaign is being torn between the two camps. However, more importantly, the FPA would be promoting the use of a universal mark that would be of benefit to, and less confusing for, consumers.

This would further enhance the status of the CFP designation. At the moment, it is seen as a device by the FPA to brand its members to gain an advantage in the market place. Its legitimacy can be questioned as its standards and application appear to be totally the responsibility of the association whose members have most to gain. A body that was supported by many associations would have more legitimacy.

I raise this new body as one way of resolving many of the questions I raised earlier. Someone else may have a better solution. That would be great — let’s have a debate. However, in recent times, the FPA has not been good at open and public debate. There seems to be a coterie of vested interests that wish to shape the FPA for their own self-aggrandisement. This has been behind many of the recent disputes in the FPA.

What is certain, is that the current situation cannot continue. If it does, it is more than likely that the FPA will be emasculated and the consumer confused. The FPA was founded and nurtured by far-sighted hard working members. Let their efforts be rewarded by continuing where they have left off.