Executive Summary
The membership of the Financial Planning Association has been declining for several years. After a peak of over 28,400 members in late 2002, the organization was largely flat for many years, still hailing at 27,805 members by the end of 2007. But the membership tumbled almost 15% from the end of 2007 through the end of 2009, and it is been largely flat at a base of approximately 23,600 members since then.
The FPA has suggested that its declining membership count is a result of its strong and passionate advocacy positions - in particular, its high Standard of Care and its positions on fiduciary financial planning - which have perhaps alienated some current/former/prospective members, but defends its positions (and their membership-limiting consequences) as being a necessary result of its mission to advance the financial planning profession.
Yet the question arises - if high standards of care and fiduciary financial planning are really at the heart of FPA's membership problem, then why is FPA membership declining even while the number of CFP certificants who are already committed to a comparable standard of care and fiduciary duty continues to rise!?
The inspiration for today's blog post is a recent article by Bob Veres for Financial Planning magazine entitled "The FPA's Dilemma" that discusses some of the recent membership challenges of the Financial Planning Association. What's notable about the article is that, unlike some other recent criticism of the FPA (for instance, Andy Gluck's article in Financial Advisor magazine earlier this year) which focused on its fiduciary positions, the SEC lawsuit, and the split with the broker-dealer community and the Financial Services Institute as reasons for declining membership, Veres suggests that the problems with FPA membership relate to challenges with staff and leadership, the idea that people "send the FPA their dues and get little or nothing in returns", and the FPA's relationship with its sponsors and product vendors. In other words, Veres is suggesting that the membership problem is NOT simply FPA's fiduciary advocacy stance and its high standard of care excluding people.
And there appears to be some credibility for that notion. Earlier this week, I discussed how financial planning seems to slowly be winning the fiduciary war from the inside out, as the percentage of financial advisors that are CFP certificants - and therefore people who are taught a fiduciary process and commit themselves to the CFP Board's fiduciary obligation in the Standards of Professional Conduct when providing material elements of financial planning - is rising, and may at some point reach a critical mass level where the majority of the industry already practices as a fiduciary, and therefore fiduciary regulation may become a fait accompli.
But what's notable is that while the number of CFP certificants has grown steadily for the past decade, and the percentage of financial advisors that are CFP certificants has risen, the percentage of CFP certificants that are FPA members appears to actually be declining! In other words, even though the number of CFP certificants is rising, FPA is not attracting and retaining their fair share of those prospective members - all of whom would already easily meet the FPA's Standard of Care and fiduciary focus, simply by virtue of already adhering to the CFP Board's Standards of Professional Conduct, if that was the only issue!
The graph below shows the membership count of the FPA for the past decade, along with the number of active CFP certificants. As the results reveal, the headcount for FPA membership was flat for most of the decade, and declined more recently, while the number of CFP certificants has steadily risen every year. Arguably, if the only (or primary) barrier to FPA membership was its standard of care and fiduciary position, it would be a non-issue to at least this subset of financial advisors, who already adhere to a comparable fiduciary oath and standard of care. Yet while the number of CFP certificants has risen by over 23,000 in the past decade, the FPA's membership has declined by over 4,000? Why couldn't the FPA capture all or at least SOME of the dramatic cumulative rise in CFP certificants?
To me, this suggests that Veres may be right about at least some of the concerns he raises. Personally, having attended the FPA Experience conference myself (which Veres rails against as being very vendor-tilted), I found the exhibit hall to be much more rounded out with a range of relevant product and service providers for financial planners that what Veres suggests. In point of fact, I have long suggested that the opportunity to see the FPA Experience exhibit hall - the greatest gathering anyplace in the country (in the world!?) of product and service providers focused on financial planning - is actually one of the PRIMARY reasons TO attend the conference, even more so than the content! Personally, I'd like to see the exhibit hall of the conference expanded further, to truly make FPA Experience the "big show" in financial planning.
Nonetheless, Veres has some valid points about other areas of concern for the FPA, from its occasional difficulties in driving discussion on its website forums, to some of the criticisms on its research, to the challenging reality that most of what FPA members receive for their dues is at best intangible and sometimes ephemeral. And although Veres doesn't note it, I know I've personally heard a lot of feedback that a major challenge of FPA is the inconsistency of the chapter experience - a difficulty I've witnessed personally as I travel to speak to many FPA chapters across the country every year.
Of course, the reality is that every organization faces challenges these days, and it would be unrealistic to expect the FPA (or anyone else) to be perfect. And similarly, we may not all agree about exactly what the primary problems are at the FPA. But I think the Veres article deserves some real acknowledgement for its emphasis that the problems with FPA's membership may NOT merely be the result of its fiduciary advocacy and standards of care. In fact, it arguably might not even be much of a differentiator at all anymore - although it was still the closing line in the FPA leadership's recent article in defense of its current direction - in a world where an increasing majority of those who really do believe in financial planning have already obtained the CFP marks, thereby making FPA's standard of care redundant at best. Perhaps the FPA should drop its own standard of care entirely, and simply embrace "having CFP certification" AS its standard of care, given that the CFP marks are clearly emerging as the dominant benchmark designation of the profession, and merely capturing 2/3rds of all CFP certificants as FPA membership would nearly double their membership!
In any event, though, at least amongst the now-over-63,000 CFP certificants who already do adhere to the CFP Board's standard of care, the question remains why more are not attracted to FPA membership? Wouldn't membership in the FPA be appealing, if only for advocacy back to the CFP Board? For that group it least, it seems unrealistic to suggest it's because of the FPA's Standard of Care. Which implies that perhaps the greatest challenges for FPA membership are not because of its fiduciary views... but instead is in spite of them?
So what do you think? Are you an FPA member? Why or why not? Do you think the FPA's standard of care and fiduciary advocacy is a turn-on, a turn-off, or merely duplicative in a world with the CFP Board and its marks? What do you think the FPA's unique value is in the competitive landscape? What should it be?
What struck me about Veres’ article is the accusatory tone. He accused FPA of pandering to companies that sell bad products. But the very products he criticizes are advertised in Financial Planning magazine, where Veres is a regular columnist. His morals being so righteous, it seems that he should not be writing for a magazine full of variable annuity sales. It was comical reading his article, then turning the pages.
Michael, you make some valid points in a respectful way. I don’t believe the FPA Standard of Care is currently driving anyone away. I think the economic jolt in 2008 was the biggest impact in lost members, with income dropping so radically while most expenses were fixed; that’s the way it was for our firm. Recovering lost members is very difficult.
The SEC lawsuit certainly alienated the wirehouse community. I don’t know how many FPA members were from wirehouses, but I assume it shrank during the lawsuit; now that’s history.
I just heard a Merrill Lynch branch manager give a speech promoting Dodd-Frank and the fiduciary standard. So that tide is turning, as you have stated. And I don’t believe the fiduciary stand has anything to do with FPA membership growth or decline.
I believe the CFP community is the target-rich environment for the FPA. Reading between your lines, I think that’s what you are stating.
I think the FPA’s unique value is [a] professionalism in the financial planning realm, and [b] collaborative networking among other professionals. I hope to see stronger ties to the Attorney and CPA camps. CFPs can differentiate themselves from the rest of the planner world by effectively networking with those “older” professions. We need to strive for more credibility in their eyes. The CPA crowd is very myopic, and a tougher nut to crack.
It’s also interesting that Gluck hammers on FPA vs. FSI membership. FSI is B-D centric, and when LPL purchases one-year memberships for all their registered reps, I don’t think it’s fair to compare membership growth. Wondering if LPL will re-up next year, or if it will be each rep’s financial responsibility to pay their own dues. How would that affect FSI membership? But our respective membership levels is really an apples-to-oranges comparison. FPA and FSI each have a different focus, which isn’t at war; we’re just different. Sometimes aligned, sometimes opposing, sometimes neutral. But an emotion-based article on FPA vs. FSI gets readership, which is the goal for many authors.
Mark,
Indeed, I’m sure it’s no coincidence that the decline in membership struck most heavily through late 2008 and into 2009 as the economy and markets went through their downturn. Although some firms weathered it better than others, it was a severe pinch on income and profits for virtually everyone.
That being said, the idealist in me still thinks that the BEST time for a membership association to shine is in a time of crisis. If we can’t figure out how to convey compelling membership value when our members are in desperate need, then where is our value? Surely, I don’t think FPA is trying to position itself to only be a fairweather friend by any means, but it seems to me that times of crisis are when people cast about most for a lifeline to help them through. Shouldn’t that be an opportunity to galvanize and solidify the relationship between FPA and its members, and by doing so attract even more members who seek out FPA’s value at such a critical time?
In the context of the financial crisis, to me that means things like:
– Weekly economic updates from a highly reputable company/economist (which can be provided by sponsor partners), giving members ongoing guidance to understand what’s happening (I know some broker/dealers who stepped up to this for their constituency with DAILY high-quality webinars, because that’s what their ‘members’ needed!)
– Weekly written materials (which can also be provided by sponsor partners, and/or re- or co-branded with FPA) with economic information for planners to read and share with their clients
– Practice management webinars and blog/article content directly relevant to the times. “5 expenses you can cut now {FPA membership wouldn’t be one of them!}” and “10 ways to hunker down in your practice to survive the storm” would have been popular material I’m sure!
No, I’m not so naive as to think that we’ll unequivocally retain 98%+ of our members through an economic and financial crises, no matter how compelling our member value is. But I find it striking that when put to the test, people gave up their FPA membership in far greater numbers than their CFP certification, and that so many who left still haven’t come back two years later. That still suggests something lacking in terms of raw membership value, and that FPA didn’t capitalize on the opportunity to be a lifeline and beacon to a broad number of current and prospective members in the midst of a difficult environment.
As for FPA’s unique value as you state it… I have to admit, I still don’t find it “unique”. The Society of Financial Services Professionals is “A National Network of Credentialed Professionals Working in Diverse Financial Disciplines” with a stated goal of supporting multi-disciplinary networking for financial services professionals. How is FPA’s unique value of collaborative networking among other professionals really unique? Similarly, we suggest “professionalism” in the financial planning realm to be a key unique value differentiator… just like NAPFA, and the AICPA’s Personal Financial Planning section? Again, this seems more like a competitive space to me than literally a “unique” value? And given the growing numbers in NAPFA and the AICPA PFP section (not to mention ‘wealth managers’ amongst IMCA and the CFA Institute), it appears that in fact FPA is fighting and struggling competitively in that space, not uniquely delivering value in it.
Perhaps more simply put, what does it mean to have a unique value of “professionalism” in a world where 90%+ (95%? 99%?) of practitioners in every major membership association (FPA, NAPFA, SFSP, AICPA PFP, IMCA, CFP Institute) have already committed to some form of professional designation (CFP, CPA, CFA, CPWM, etc.), with the attendant standard of care and ethics that accompanies it?
Respectfully,
– Michael
To me, this is a marketing problem, not a primary focus problem. FPA supports real financial planning. I’m good with that.
I believe the continued erosion in FPA membership comes first from those BD-types who didn’t leave in the mid-2000’s when FPA adopted a more CFP-centric mantra. It took a while for these product-centric advisors to realize that FPA wasn’t a good fit so they are only now dropping out.
What IS interesting is that while the number of fiduciary-based CFP’s is increasing, FPA’s numbers are not. THAT is where the marketing problem lies.
Why do fiduciary-centric planners not find what the FPA has to offer as beneficial? Is it just the economy? Or is it something more? Could it be that there are other alternatives? There are other alternatives in every business. The key here is standing out as the one choice that is “a must” while everything else is optional.
In 2004 as I was completing my CFP studies, the FPA was presented to me as the “now that you are ready to be a financial planner, you must join the FPA. When I got to my first conference, I found a number of people who thought like me. I also found a lot of “advisors” who were more interested in managing investments or selling products than really working through the planning process.
Since then, FPA has focused on PLANNING (as I think they should) and I have been encouraged to become more active. Other REAL planners got frustrated with the non-planners in the organization and left FPA. It will take a lot of work to get them back. Their perception is already tainted. Other product-oriented advisors also were frustrated by FPA and left (eventually). The newbies (mostly new CFP’s) have no idea what FPA stands for so they are trying lots of different orgs to find the one that fits.
Better marketing and a stronger position in the marketplace will help get these newbies to sign on. So will a commitment and some good energy by those of us who have are already here – and for that I am especially happy to see you, Michael, and others pushing the envelope and questioning everything.
There is only one FPA – devoted to financial planning, not product sales, not just investments (although FPA does not promote one business model)… and not just CFP mark holders, but people who want to help others make better choices with their money.
I think when we’re ready to be really proud of the work we do as REAL financial planners regardless of how we’re paid or the letters after our name, there will be plenty of others who are ready and willing to join us.
Michael-
Thanks for your thoughtful, thorough, and insightful look at this issue. This is not a conversation that is lost on, or ignored by, those of us in FPA leadership.
While identifying root causes are the building blocks of any forward looking strategy, what I really hope to hear from your loyal and esteemed followers are ideas on the potential solutions to the challenges you have outlined. Some of the questions we can collectively discuss are:
How do we, as an association, gain better access to the growing CFP rolls?
How do CFP(r) certificants use a value-based membership organization to enhance their practice and personal standard of competence?
As an FPA member, what draws YOU (the reader, not just the author) to the organization? Do our core competencies of knowledge, community, advocacy, and leadership resonate with you?
What role does FPA play in advancing the body of knowledge within the financial planning profession?
What space does/should FPA carve out in ensuring viable pathways for new entrants to financial planning, whether they emanate from one of the many education institutions that now offer financial planning education, or are “new” based on a change of career?
The questions can be endless, and I will leave space for the reader to add their own to the conversation.
My fear is that a myopic focus on historical trends can distract us from the opportunities that exist in our future. I would note that ALL FPA members have access to the new community networking platforms you mention in your post. Members can use FPA connect, accessible at http://www.fpanet.org (professional tab) to join the conversations in our numerous communities. In fact, members can have direct input on the future of the organization through our strategic planning community on that platform. I would encourage all with a stake in FPA’s success, including our vocal critics, to join the forward progress we are seeing at a leadership level!
As an organization, we are committed to doing whatever it takes to find solutions, not just dwell on past challenges. I would venture to say that it isn’t simply the fate of FPA at stake here, but the general direction of the financial planning profession!
In the meantime…….Happy Thanksgiving to you and your families. I look forward to hearing from each of you over the next several years as FPA continues to evolve and grow!!!
Michael as I’ve said to you elsewhere, my reason for dropping my FPA membership was that I found the meetings and the Greater Chicago Chapter to be dominated by commission-based product peddlers. This was my experience with the chapter that I was in, I can’t speak to FPA as a whole.
Michael,
My chapter experience was similar to Roger’s. In addition to not feeling like I fit in, the meetings were all pretty far away. I went to the meetings for a couple of years and spent a year on the Media Relations Committee, but ultimately stopped going. I haven’t gone to a local meeting in 5 years, so it may be different now.
I am still a member, though the last two years the renewal sat in my inbox forever. I can’t say whether I will renew again in May when the issue comes up next.
I do feel much more connection to NAPFA, for what its worth.