ASSOCIATION MEMBERSHIP – GOOD, BAD and the UGLY

The CEO of the AIOFP, Peter Johnston reports

With efficient spending and cost savings now playing a significant role in operating a practice more than ever, it is time to look at your Association membership and assess whether it meets your needs and expectations.

As recent outcomes have demonstrated, an Association membership can be a rewarding experience or a disastrous pathway. Many Advisers now realize they have been giving their political capital to certain Associations over the years to be either used for or against them….the last 8 years strongly suggests the later has occurred.

It is time to spend your political capital wisely and objectively, that commences with which Association you join.

GENERAL COMMENTS – There is no doubt a transitional period of change is enveloping the Advice industry from several directions with Association culture and membership relevancy high on the list.

Like Advisers that need to evolve with new ways of operating, the same applies to Associations. The last 8 years of certain Associations representing Advisers in Canberra has clearly not worked, the traditional business model is fundamentally flawed and needs to change.

With the demise of the mandatory TPB membership ‘glue’ literally forcing Association membership on the Advice community, it is time to look at the scoreboard and players to see what they have delivered. It is also time to assess why Advisers have joined specific Associations in the past – blindly joining or for the wrong reasons has been very costly over the past 25 years for the Advice community.

Please consider the following:

• There are currently at least 13 Associations vying for your fees in the Advice community. With a 35% + drop in Adviser numbers over the past 3 years something must give with forced mergers, failures and takeovers highly likely.
• With AIOFP/SMSF/FPA/AFA/TAA/TSA/SIAA/FSC/FINSIA/AFMA/FAA/IFAA/PIFA and another 5 Accounting related Associations on the fringe of the Advice sector, it is simply not sustainable.
• Having these Associations all trying to deal with Canberra is far from ideal, no wonder the Politicians turn to traditional ‘friends’ for direction and we are seen as a ‘rabble’ with no direction or consensus.  The overall Advice Communities political capital is being severely diluted, this must be arrested and focused to maximize our power in Canberra.
• The last 8 years has been a disaster for the Advice community, yes changes were needed but the agenda of this Government was unreasonable to say the least. There is little doubt the agenda motivation emanated from the Institutions backing the Liberal Party wanting to remove advisers. To achieve their legislative objectives, the Minister needed support from ‘the industry’ to implement FASEA/LIF – this is where the institutionally aligned FSC/FPA/AFA cashed in the political capital of their Adviser members to support Minister O’Dywer’s objectives.
• Having hybrid membership Associations where Institutions/Superannuation funds are present in their membership base or as influential funders have proven to be disastrous for Advisers over the past 25 years.
• Unmixed member-based Associations are a far better choice, it avoid conflicts and poor outcomes for minority groups, with only 1 membership category to serve consensus is readily achieved.
• Having Institutionally biased Associations trying to represent the interests of Advisers is wrong on many levels and proven to be disastrous for Advisers – the divide & rule tactics employed by them has smashed Advisers in Canberra over the years.
• Having Associations whose priority is to Consumers [and not their Adviser members] should be in the consumer space, not Adviser advocacy.
• Advisers should be wary of Associations with oppressive internal member disciplinary rules that can follow you to the grave and are at the discretion of the Management.
• The broader financial services industry should be divided into ADVICE and PRODUCT, vertical integration and its ramifications has been ruinous to the industry and consumers over the decades.
• Equally, Associations should be either advocates for PRODUCT manufacturers or ADVISERS, the hybrid Association membership base is a conflicted environment where Advisers have commonly been the victims.

SPECIFIC COMMENTS – with a possible change of Government and a new direction for the Advice community looming, it is time to call out the past mistakes, learn from them and suggest solutions for Association conduct and participation going forward.

Please consider the following –

• Only Adviser centric Associations should be representing Advisers in Canberra. Conversely, only Institutional centric Associations should be representing Institutions in Canberra.

Lesson? – Mixed membership Associations should be avoided and the FSC should not be welcomed in our sector, their principle membership cohort are Institutions.

• The FASEA/LIF/Grandfather ban/Compliance overload legislative decrepitude was a disaster for the Advice community but backed by the FSC/FPA/AFA.

Lesson? – Only Adviser centric Associations should be representing Adviser issues in Canberra. 

• A critical element going forward is to educate all Politicians on the Advice vs Product differential when they are seeking information from the financial services sector to avoid confusion.

Lesson? – We will be providing a directory of Associations to all Politicians to ensure they are speaking with the most appropriate entities.

• Before joining any Association, an Adviser should establish whether Advisers are the Associations priority and who’s best interests will they serve. Many Advisers do not realise they are members of an Association who puts Consumers best interests first before theirs.

Lesson? – Always read the terms and conditions before joining any Association.

• For example, one of our members has been a member of another Association for 25 years and currently waiting for an AFCA dispute outcome where the client lost no money but is now trying to say [with the power of hindsight] they could have made more in another stock selection. This has been going on for over 2 years. This Association has now fined this person $15,000 for not acting in the client’s best interests and demanding payment or legal proceedings will commence. This is BEFORE the AFCA determination has been handed down and even if he resigns from the Association, they can pursue him in the Courts.

Lesson? – Always read the terms and conditions of membership before joining any Association.

• The principle lesson the Advice community should take from the past 8 years of poor political outcomes is to be careful with who you give your political capital to. Paying to be a member of an Association that does not have your best interests at heart gives them the opportunity to use your political capital against you. Being a member of an Association because they have attractive ‘bells & whistles’ or free services is commercially and politically dangerous.

Lesson? – spend your political capital wisely, your future may depend on it.

• There are too many Associations and those who have been the ‘peak bodies’ in the recent past have performed poorly for the Advice community. Advisers need an Association that will always act in their best interests without fear or favor and stand up to protect members and their clients in Canberra during all stages of the electoral cycle.

Lesson? – why would an Association not advocate for change during the last stages of the electoral cycle, that’s when the biggest impact can be made to policy amendments and initiatives? 

THE AIOFP POINT OF DIFFERENCE – We are obviously positioning ourselves to be the Association to represent the best interests of the Financial Advice community. We think our credentials have been demonstrated over the past 24 years where we have always acted in the best interests of our members and the Advice community in general.

Over the past 3 years we have ventured down a different path to the traditional role Associations play in the political process. Associations generally take a bipartisan ‘long game’ approach fearing any favouritism to one side of politics may affect future access to key Ministers going forward.

The sustained and utter brutality of the Coalition Government over the past 8 years towards the Advice community induced the AIOFP to take a more aggressively assertive approach with a different ‘long game’ in mind.

In 2018 we could no longer just sit back and watch Advisers getting slaughtered by Government legislation and regulation. Our choice was to be either a sycophant to Minister Hume, a political fence sitter or try and do something about it. Thankfully at our 2018 AGM our members chose the latter after a recommendation from the AIOFP Board.

Over the past 3 years our achievements in the political scene with FASEA amendments, CSLR strategy and educating all Politicians on how good the Advice community really is speaking for itself, but it can and does put us at loggerheads with certain Politicians.

The AIOFP ‘long game’ is to attract as many Advisers as possible to our membership where our size and influence cannot be ignored by any future Politicians. The current realization that the Advice community is well respected by its clients is concerning the current Government in marginal seats – that is our greatest political asset going forward.

The aggregation of Advisers, employees and clients under one political umbrella is the future of the Advice community’s political security. We are not going to achieve this security going forward with 13 Associations containing Institutionally aligned entities with different agendas all competing to represent Advisers in Canberra.

Like Doctors and the AMA, any future Government will think twice about taking us on if we are organized under one entity.

Joining the AIOFP will give you the following benefits –

• Comfort we will always act in your best interests by spending your political capital wisely where it will benefit you, other member’s and clients. Our priority is to our members, considering members best interests are to their clients we see this as a natural progression of care.
• We only have member expulsion powers NOT disciplinary actions against poorly performing members. We believe only the Regulator should be deciding disciplinary actions not Associations. Having your Association inflicting further pain post ASIC activity is not appropriate in our view.
• We have 2 conferences per annum and CPD programs to assist members with education requirements.
• We will have our own PI Insurance facility managed by GSA/STEADFAST to assist members shortly.
• We have member discounts for various services.
• We have a designation to recognize excellence in Advice, the CERTIFIED FINANCIAL STRATEGIST [CFS] is available to all qualifying members.

The AIOFP Directors and management are either current or former Advisers, we are experiencing or have experienced what the industry is going through, that is our point of difference to most other Associations.

Please do not hesitate to contact us if you require any further information.

Actual Case!

My client dragged me via the FPA disciplinary process for 18 months, just because of a lapsed Fixed Term Deposit, could you believe. Then after they got me off 3 of the 4 charges, I resigned from the FPA (because they were not meeting my expectations).

I believe the client had a daughter in-law in AMP Sydney who was coaching him, in addition with another Accountant/Adviser with the FPA.

Then I had a heart attack & was paid out by MLC (the upside).

Then the client dragged me through the FPA, so I employed a lawyer & did him slowly, but it still cost me $50,000 plus time, all up.

And we wonder why people are fleeing the industry.

Regards.

Peter Johnston | Executive Director
Association of Independently Owned Financial Professionals
Suite 1211, 1 Queens Road, Melbourne VIC 3004
P 1800 111 203, d 03 9863 7574, m 0418 857 621
www.aiofp.net.au | Download my business card

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