Financial advice reforms could boost industry bodies’ membership

FINANCIAL-ADVISER industry groups will reap millions in fees if the government requires advisers to join professional bodies.

THE nation’s financial-adviser industry groups stand to reap millions of dollars a year in extra fees if the government implements recommendations that practising advisers must sign up to professional bodies.

Both the Financial Planning Association of Australia and the Association of Financial Advisers — the two main industry bodies — estimate only half the nation’s 18,000 planners are members of an industry group.

According to ASIC there are about 50,000 people nationwide who provide financial advice, but the industry estimates roughly 18,000 are financial planners registered to provide more detailed personal advice, known as “Tier 1” advice, which covers more complex matters such as superannuation and estate planning.

The remainder are largely sales people who offer “general advice” — which is expected to be renamed “product sales information” following Senate inquiry recommendations — and sell products such as insurance on behalf of banks and other providers.

Last week a report from the Senate inquiry into financial planning ethics called for planners to become members of an industry body — following similar calls from the corporate regulator and others.

Last year the FPA had revenues of $11.11 million, with $6.99m from membership dues.

This could double in coming years if membership becomes compulsory.

The FPA has roughly 8500 members, the AFA about 2000 members, and accountancy bodies the Institute of Chartered Ac­countants in Australia and CPA Australia also have some financial planner members.

AFA chief operating officer Phil Anderson said many members of the group were also members of other industry bodies, which made it difficult to ascertain how many planners were not members of a professional group, but it was considered to be “about half”.

“We are progressively seeing a large number of (financial planing) licensees requiring industry membership,” Mr Anderson said.

A number of institutions including the Commonwealth Bank, which has been caught up in a scandal involving dodgy planners, have set requirements calling for planners to hold either the AFA’s Fellow Chartered Financial Practitioner certification or the FPA’s Certified Financial Planner qualification, or the equivalent.

The FPA requires financial planners to hold a degree, or its equivalent, before being awarded the CFP qualification.

The AFA only requires financial planners to hold an Advanced Diploma of Financial Planning. That qualification, not connected to the AFA, can be completed with as little as eight days’ work.

FPA chief executive Mark Rantall said planners pressured by their employers to up-skill might prefer to obtain the qualification with the AFA because of the easier entry requirements, but the FPA would not ease its entry requirements.

“It’s a bit of a free kick, that’s true, but we are about trying to lift standards right across the industry,” Mr Rantall said.