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Associations' quandary: Boost numbers, maintain standards

Financial adviser organisations must strike a balance between the need to grow their membership numbers and a desire to enforce standards, one former president says.

Wednesday, September 5th 2018, 6:00AM 3 Comments

by Susan Edmunds

Simon Hassan recently stepped down from his role at Hassan and Associates and is operating as a consultant, as well as being chair of the Financial Advice NZ certification committee.  He is a former president of the IFA.

He said most adviser bodies were funded by growing their numbers.

"Financial Advice NZ is a prime example. As with each its predecessors, it has two main sources of income: Members (subs and other fees) and  suppliers of financial products (sponsorship in one form or another). The more members, the more sponsorship: the more 'successful' the organisations, the larger the top job, the more cash in the pool for director’s fees. It can all look pretty good – until you think again of how consumers fare, and the notion of a trusted profession."

The imperative of membership growth was in conflict with any push for higher standards.

But Hassan said, to foster the emergence of a genuine profession of financial advice, organisations had to be immune from influence.

"Their funding – or at least the bulk of it – should not be linked to member numbers, or dependent on the conflicted coffers of the big suppliers," he said.

"This is a problem that cries out a role for governments. If it is in the public interest (and it is) to have a strong financial advisory profession that helps develop and promotes pathways to higher standards that will see trust grow and better outcomes for consumers, taxpayer dollars could be very usefully be spent here."

There are about 1800 members of Financial Advice NZ. Hassan said, if adviser associations were generating about $1.5 million a year in income between them, they would struggle to do what they should.

"If the government were to put in another $4.5, (absolute peanuts) – and if membership (which at a basic level might just be compulsory) went to let’s say 10,000, the cost for an adviser to belong could fall dramatically – while leaving the professional body with headroom for things like research, standards development, promotion – things members can currently only dream about.

"We can’t expect a group that is reliant on member subs and supplier sponsorship to drive the development of a genuinely 'client-first' profession. And a genuinely client-first profession is essential if trust is to develop. But with taxpayer support I think we could do it. "

Financial Advice New Zealand chief executive Katrina Shanks said an organisation needed to represent its core objects.

"For Financial Advice NZ standards is one of our core objects therefore members have standards which they have to abide by and with the development of the Quality Service Mark this will only enforce our membership standards.

"There are approximately 8000 RFAs and AFAs currently, of which the majority do not belong to a membership based organisation. I believe many of these financial advisers provide high-quality advice in New Zealanders who would benefit from being part of Financial Advice NZ."


Tags: Financial Advice New Zealand financial advisers Simon Hassan

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Comments from our readers

On 5 September 2018 at 7:07 am Murray Weatherston said:
If this is, as it appears, a naked plea for Government to provide social welfare assistance to adviser bodies, let me urge Government to reject it outright.
How much subsidy does Government provide to Law Society and accountants and physiotherapists etc professional bodies. That's right, not a sausage.
Via FMCA/FSLAB/FAA/Code etc, Government already sets Standards for financial advisers. They have chosen government regulation of the profession - get over it. Our task as advisers is to comply. The Government is the professional body - there should be no obligation to join anything else - although advisers should be encouraged to join any body that provides vale-for-money services to them - simple commerce.
My clear view is adviser bodies need to stand on their own two feet - I think membership should be restricted to advisers - no corporate members as the basis of all professions is the individual practitioner. No outright sponsorships - (but I see no problem with bodies marketing opportunities to manufacturers and communications companies, new car dealers and travel agents etc for example be selling them the opportunity to participate (on the adviser body's terms I might add) in conferences on a commercial basis.
On 5 September 2018 at 8:24 am Doddsy said:
Here is my view of numbers
1800 Afas of which 200 odd don't practice
400 odd are sharebrokers
300 plus are in banks and few are members
Leaves about 900
RFAs 6400
2300 are in IBANZ leaves about 4100 who are in Life and Mtge
Who are members?
Fin Adv 1700
Triple A 250
AMP 200 odd
Total FA universe about 5000 then and about 2250 are members of something
That's 45% not bad
But Value for Money is the key
And Katrina is focused on that
66 days in seat and doing well
Remember Advises are the best ambassadors for a profession
So if they want it join one
On 10 September 2018 at 8:39 am TripleA said:
I think the TripleA would concur with Murray's view that it isn't the role of government to subsidise financial advisers membership of a professional body.

Advisers themselves need to look at value-for-money for the services and benefits each association provides and determine which professional body best delivers that for them.

It's on the advocacy front I think that a lot of the value is delivered in terms of the work that goes on behind the scenes with MBIE & FMA in support of advisers and that is something that most professional bodies are happy to join forces on.

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