FPA deficit will require some answers
The recent news that the Financial Planning Association (FPA) will post a $2 million deficit, its first ever, for the 2003-04 financial year is a curious turn of events for the beleaguered professional association (see p12).
As a letter received by Money Management this week pointed out (p10), how can the doyens of financial planning run an organisation and get it so wrong.
The FPA claims it overestimated the extent to which it would generate revenue from its education program in the months leading up to the FSRA kick off, as well as the returns from the annual conference in November.
Rubbing salt into the wound was an announcement the following day from the Securities Institute that it had made a $1.9 million surplus, with revenue from education up by 70 per cent and accounting for 25 per cent of the surplus.
While these numbers are quite strong, it is worth remembering the Securities Institute is an education provider while the FPA is a professional association.
The Securities Institute also offers education to a far wider group of professionals than the FPA and thus has access to a broader revenue base.
So why was the FPA an education provider in the first place?
Some of the reasons are commercial — it made a heap of money from education — and some historical, it led the way in creating and providing education for advisers before there was a regulatory requirement to do so.
The FPA has made it known it is considering outsourcing its education, which will be a hotly contested space for the dedicated education providers. It will also probably see some changes in the pricing structure of education.
These steps may make sense from a commercial point of view, but they do not change the fact that the FPA is staring at a $2 million hole. It still has $4 million in reserves, which is a solid figure, but members will ask how, despite all the forward planning, the association could have called the numbers so badly. Did it leave its time to pull back from the education market too late and did it overestimate the demand for its own courses in a market filled with competitors?
The next annual general meeting is in December at the annual convention so there is plenty of time to come up with some good answers and ensure the numbers going ahead predict better times. The only caveat is, will the association’s members wait that long?
AUTHOR
Jason Spits
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