Financial services industry can’t shake puberty blues

I have agonised over writing this particular column. I was a foundation member of the IAFP; on the steering committee that set up the Certified Financial Planner (CFP) designation; I have been on various committees of the FPA for many years; and I am still on the Sydney Chapter committee.

In a number of my articles I have raised issues about the FPA. In November I wrote an open letter to the then new chief executive Michael McKenna arguing that: "the FPA is starting to believe its own propaganda: that everything is rosy in the garden and the future is guaranteed."

Interestingly, it was that article that I have received most response to - and all supportive.

I have discussed my writing of this article with a number of people. Some have suggested I shouldn't write it, others that I keep the argument within the walls of the FPA, but most have encouraged me to write it - as long as I don't mention their names.

The FPA is fixated on the CFP, even to the point of contemplating changing its name and almost to the detriment of everything else. At a time when we have the industry going through unprecedented change (regulatory, technology, globalisation), an obscene amount of the association's resources (people and money) is going into the CFP.

It appears that more effort is being put into reacting to the new accreditation initiatives being proposed by the International Board of Standards than into regulatory matters. I believe $1 million has been earmarked for the CFP marketing campaign.

Unfortunately, even Wes McMaster has had a rush to the head about CFP. In the article,CFP makes its mark down underin the June edition of the FPA'sFinancial Planningmagazine, he is quoted as saying: "FPA chairman Wes McMaster estimates that more than two-thirds of the FPA's membership (will be CFPs) by the end of the year."

The FPA has about 10,000 members, so 6,666 will be CFPs, even though only about 4,000 are financial planners. It's hard not to get the impression that the CFP push only wants CFPs in the FPA. Maybe its time the non-CFPs, the majority, organised a putsch.

One of the arguments being used to support the change of name is that it is difficult and confusing to promote two brands. In the homeland of the CFP, the USA, the International Association of Financial Planning (IAFP) is considering changing its name to the FPA.

The CFP Board of Standards also is a separate entity to the IAFP/FPA.

As most of you would be aware, a planner can only use the CFP mark if their dealer is a principal member of the FPA. Recently, there has been an effort to de-couple this nexus.

Some people within the FPA must have thought this would be a fait accompli. It was not.

However, the recently issued CFP Professional Education Program details what is required to be a CFP. Surprise, surprise, there is no mention of the fact that your dealer has to be a principal member of the FPA.

Recently, some principal dealer members of the FPA have been proposing that there should be a CFP principal designation to recognise the unique two-tiered regulatory structure we have in Australia. One argument put up against this was that the International CFP board of standards would be a stumbling block.

This is interesting argument, because one of the initiatives being proposed by the CFP board is for CFP board accredited firms. There are rumours circulating that the CFPs in the USA are opposing this initiative (as well as the idea of a CFP associate) as they believe the full service broking firms are behind these initiatives and that it will undermine the credibility of the mark.

There are many in the FPA who do understand that in Australia, it is the dealer who is the licensee not the planner. In the USA, the situation is reversed, it is the planner who is the licensee.

The Americans see that there is an argument for principals having some sort of CFP designation. However, there are some who want the criteria for accreditation based on numbers and ownership. One suggestion is that for a principal to be CFP accredited at least 50 per cent of its planners must be CFPs and they must be the majority owners of the business. Apparently, the reasoning behind this latter requirement is that it would stop those big nasty institutionally owned principal dealer groups from becoming CFP accredited. How precious and condescending can the CFP push get?

This thinking is tantamount to asserting that these types of dealer groups, because of their ownership, are and should be regarded as second-rate. What flawed logic! Surely the criteria for accreditation should be based on standards not numbers and ownership.

It is not hard to find a number of institutionally-owned dealer groups that conduct their business more professionally and at a higher standard than many of the smaller owner operator dealers/ planners. Possibly one of the standards could be based on the number of CFPs, but most of the standards should be based around the conduct of the dealer business - setting a higher hurdle than ASIC.

I do not believe the CFP 'push' is malicious, they are just passionate about trying to make the CFP mark the professional designation for financial planning. It is good to be passionate, but not to become obsessive and fixated. This is what I believe the CFP 'push' have become. And if they continue they could destroy the FPA, as they are perverting the original goal of the FPA which is to represent the financial planning industry.

The FPA was set up as the financial planning association not the financial planners' association. Less that half of its members are planners, and even less again are CFPs.

This majority of non-planners contribute a lot of resources and credibility to the FPA.

The strength and weakness of the FPA is that it tries to be all things to all people and as a result has many and sometimes conflicting objectives. This has to be sorted out quickly.

My view is that the FPA should be an umbrella association with number of affiliates.

One of these affiliates could be the body that is responsible for CFPs and another for dealers etc. Each affiliate could then focus on their own bailiwick, with the umbrella FPA functioning as a resource centre, lobbyist and promoter of financial planning. This view is not new and has been put forward by many people before me.

Unfortunately, we are not adults yet. We are still going through our puberty stage where we are insecure and self-centred. I hope we grow up before it is too late.