Could FPA’s Waning Power Lead to Its Untimely Demise?

For members of the financial planning community here in the US, the answer to the question “Why not just merge the FPA and CFP Board into one organization?” quickly comes back to the fact that the CFP Board has a long and unfortunate history of engaging in blunders from time to time, for which the FPA (and its predecessor organizations) can sometimes play a key advocacy role in getting the CFP Board back on the right track. Yet when the FPA refuses to take a public position on key issues to represent CFP certificants to the CFP Board, it raises the question of whether the FPA is simply making itself irrelevant and is becoming redundant as a membership association.

To some extent, it’s not entirely surprising that the FPA has been less willing to push the CFP Board on advocacy issues pertaining to CFP certificants, since it doesn’t have a lot of power to advocate with as the FPA’s own clout has waned dramatically while its share of CFP certificants declines. If the FPA had kept pace with the growth in CFP certificants itself, and had 40,000-50,000 of them as members, it would be hard for the CFP Board to ignore. Since the FPA has failed to take up the mantle for CFP certificants and its market share has fallen to fewer than 25% of CFP certificants as members, its role as a check-and-balance power to the CFP Board is coming undone, and the balance of power is shifting to the CFP Board.

The rapid decline in FPA’s power has been astonishing, especially given the recent compensation issues of the CFP Board. The FPA could have taken the situation as a renewed opportunity to reassert itself as being relevant in representing CFP certificants to the CFP Board and embolden its CFP advocacy brand, especially on behalf of its members working at broker-dealers who may have been slighted by the compensation disclosure debacle but are not comfortable confronting the CFP Board directly. Instead the FPA deferred entirely to the CFP Board about when to have “the talk” about its recent compensation disclosure issues (and given that the CFP Board has insisted there is no problem to talk about, is tantamount to the FPA just looking the other away and ignoring the issue altogether).

In other words, in less than 10 years the FPA has gone from successfully suing the SEC to defend the interests of fiduciary financial advisors and commanding significant political clout to not even being willing to publicly call out the CFP Board on the blatant flaws in its compensation disclosure rules at all.

In the meantime, the FPA’s waning power seems to be not only external. It is also struggling to keep itself focused and on message internally as well. For instance, despite trying to work collaboratively with the Financial Planning Coalition, an FPA board member recently raised the question of whether financial planning should be state regulated (while a reasonable consideration, the Coalition has not publicly agreed to pursue such a course). There are rumors that the FPA of Florida statewide organization is exploring whether it could implement some kind of state licensing for financial planners without necessarily advocating for the CFP marks that are central to the FPA’s mission.

Though FPA chapters are technically separate, standalone legal entities from the national organization, the conflict highlights the fact that the FPA still hasn’t fully obtained the buy-in of even its own chapters to the organization’s CFP-centric focus and bylaws, even 14 years after the merger.

The FPA’s inability to stay on-message and coordinated with the Financial Planning Coalition raises the question of why the CFP Board would want to engage the FPA in the Coalition at all, as there’s little purpose to having the FPA in the Coalition if it will not (or cannot) support the whole purpose of a “coalition” which is to maintain a unified advocacy front.

The FPA’s uncoordinated role in the Coalition is especially problematic since the primary asset the FPA brings to the Coalition—its state chapter system and potential to help drive a grassroots effort for state regulation (should the Coalition actually decide to pursue state regulation in a concentrated and coordinated manner)—isn’t much of an asset if the FPA can’t steer and coordinate its own chapters in the first place! Yet the possibility that the FPA may be making itself more of a liability than an asset to the Coalition is a dangerous position, given that the FPA needs the Coalition for advocacy clout far more than the Coalition needs the FPA (as the CFP Board already has more dollars, greater numbers and stronger connections given its Washington base. If the FPA undermines its own role in the Coalition, its advocacy power and relevance to the profession will wane even further.

Of course, what is a decline in the power of the FPA also represents a rise in the power of the CFP Board, a transition in the balance of power that the CFP Board seems intent to accelerate and capitalize upon to advance its own goals.

As noted earlier, the shift in the profession’s balance of power has allowed the CFP Board to control the issues, including not only quieting FPA amid the CFP Board’s refusal to acknowledge a problem with its compensation disclosure rules, but forcing NAPFA to abdicate its own leadership of the “fee-only” definition and capitulate to the CFP Board’s position despite the fact that NAPFA originated the fee-only definition and movement.

However, over the past two years the CFP Board has gone beyond just trying to drive and control the issues, and appears to be proactively trying to undermine the FPA—a potential “silent war” assaulting the FPA’s role in the profession and even its financial viability.

First there was the CFP Board’s attempt to begin to offer CFP CE credit, effectively going into competition with the FPA (and other CE providers), which could have damaged attendance at FPA (and NAPFA) conferences that are still a key revenue generator to fund the organization’s annual operating budget. The FPA fought hard and repelled the CFP Board’s attempt, along with NAPFA, which was similarly threatened, but only after engaging with a fervor that seemed to signal that the FPA recognized that its own life was on the line.

Then earlier this spring, the FPA announced its partnership with the Academy of Financial Services (AFS), including the decision to co-host an academic track at the FPA BE conference and for FPA to co-publish their Financial Services Review journal. Not to be outdone, the CFP Board co-opted the FPA’s announcement with AFS by declaring its own new initiatives just weeks before the FPA/AFS partnership became public, including announcing the CFP Board’s new academic financial planning journal to compete against the FPA’s Journal of Financial Planning (and the AFS’ Financial Services Review), and a new Center for Financial Planning to support academic research.

The CFP Board’s announcement of the initiatives—which seemed premature given that they still haven’t been implemented more than six months later—was rumored to have come specifically to pre-empt the FPA announcement once the CFP Board had failed in its own attempt to partner with AFS.

More recently, the CFP Board struck against the FPA again, announcing the launch of a new career center in 2015 that would be a “one stop shop” for guides on how to “bridge the gap” from student to financial planner, job and internship listings and other career management content, a rather direct dig at the FPA’s own Job Board and its now-defunct “Bridge the Gap” program which have not lived up to the task and could now be trumped entirely by the CFP Board’s new initiative.

This presents not only financial implications to the FPA—as their Job Board is a source,  admittedly not huge, of non-dues revenue for the organization—but also potentially cuts off the FPA’s lifeline to students as future members. After all, the biggest issue a graduating financial planning student faces is trying to find a first job and enter the profession, and if the CFP Board is perceived as the go-to source for that solution, the FPA is potentially written out of the student’s awareness altogether.

And the FPA’s battle-weary response to the CFP Board’s latest initiative? The FPA not only declined to fight the issue (now so weak that it has to choose which battles to fight and which it will just concede), but it embarrassingly applauded the CFP Board’s victorious effort at implicitly highlighting the FPA’s failures and making the FPA less relevant to new students in the future.

Ultimately, the risk to the FPA is that if the CFP Board manages to chip away at enough of the FPA’s supports—from its pipeline to students, to its non-dues revenue channels with the Journal, and the Job Board (for which firms pay to have job listings), to its conference attendance and offering of CE credits—the FPA itself could financially topple.

As it is, the FPA’s revenue is down 36% from 2008, and it has been forced to trim staff and services accordingly, despite the fact that the markets, economy and financial advisors are all seeing record highs for income and growth.

If the FPA is off 36% in revenues despite the economic recovery of the past five years (and down 17% in members despite the fact that the number of CFP certificants is up 20%), then what happens when the next recession comes along and things get really tight, and more advisors choose not to renew while prospective sponsors also cut back their advertising budgets? Can the organization survive another recession after failing to recover from the last one, when it’s now down to only $2M in net assets (on a $10.6M operating budget)?

Acknowledged or not, it seems that the FPA is in a fight for its very survival right now, and it’s a fight the FPA may not win. A loss of the FPA would leave a gaping void in the profession, as it’s simply not feasible to have a group of 70,000+ CFP professionals who do not have their own dedicated professional membership association.

Which, in point of fact, may be exactly what the CFP Board is waiting for: to either facilitate a takeover/assimilation of the FPA, or simply replace it with a new membership organization. While the CFP Board can’t literally be the membership association for CFP certificants, since it is legally structured as a 501(c)(3) charity, not a 501(c)(6) membership association, which limits its ability to directly deploy its assets and income as a membership organization, it’s not difficult to imagine ways the CFP Board could still facilitate the process.

For instance, while it’s not clear whether the organization could legally use some of its own $23M war chest of net assets on its balance sheet (according to its 2012 Form 990) to fund a new membership organization spinoff, it might use its relationships to leverage sponsors that could “seed” a new replacement membership organization. It could then establish a tight integration between the CFP Board and the new association to rapidly accelerate its growth by, for instance, doing marketing directly to its list of CFP certificants to encourage them to join the new organization.

In fact, I would go so far as to say the CFP Board and its Board of Directors would be remiss if they haven’t at least been exploring potential paths to supporting/sponsoring/spawning their own membership association if the FPA takes itself out of the picture.

Of course, the FPA has become weak enough that the CFP Board could potentially launch a competing membership organization now, and just further accelerate the decline of the FPA. But realistically, the CFP Board likely would prefer to see the FPA fold (or become desperate in a manner where the CFP Board controls the terms of a merger or wind-down), so that the CFP Board can try to take over the one unique asset the FPA has that the CFP Board wants. That is the FPA’s state chapter system and capabilities to do grassroots lobbying at the state level, should it be decided that’s the ultimate regulatory path to pursue to advance the financial planning profession (with the CFP Board obviously advocating for the CFP marks as the minimum professional standard).

So given all these challenges, where should the FPA go from here? At the most basic level, the FPA has to focus on one simple reality if it is going to survive. The only way to defend itself against the CFP Board is to have as many CFP certificants as possible, who support the FPA for its advocacy efforts on their behalf (including against the CFP Board) and keep the FPA relevant as a separate membership organization from the CFP Board.

The FPA leadership should make “market share of CFP certificants” its one crucial Key Performance Indicator for the coming years when evaluating the success of its staff, programs and efforts. Just growing membership isn’t enough (not that the FPA has been successful in that regard); if the FPA isn’t gaining in total share of CFP professionals, too, it’s still losing ground in its power struggle with the CFP Board.

After all, with 70,000 CFP certificants (and growing), there are too many CFP professionals to not have a clear membership association loudly and publicly advocating on their behalf and helping to make them more successful. If the FPA cannot take on that role due to its fuzzy and meandering focus, lack of clear messaging or simply poor execution, then some other organization will eventually fill the void (CFP-Board-driven or otherwise). At the point where a competing membership association crops up to challenge the FPA, its demise may only be further hastened (as it cannot afford to lose what core CFP certificant membership base it has left).

Which means, once again, the FPA either truly lives into its CFP-centric mission, or it must figure out an astonishing pivot that could keep itself relevant as a membership and advocacy organization competing against another CFP-centric membership group (and given the existence of FSI, NAIFA, and others, it’s not really clear what other role the FPA could realistically fulfill).

In other words, the FPA really has no choice at this point but to embrace its CFP-centricity or, better yet, clarify its position to be “one profession, one minimum designation” so it can support the CFP marks as a pathway to the financial planning profession without undermining its relationship with post-CFP educational providers. Any other path just makes the FPA “yet another financial advisor membership association” (a tactic that has clearly done it no favors for the past decade). The less it attracts CFP certificants, the less beholden the CFP Board must be to the FPA, and the more opportunity the CFP Board has to try to undermine and replace the FPA. In other words, if the FPA doesn’t live into the vision of the ICFP, the CFP Board or some new competitor will take over the role themselves and make the FPA irrelevant to the future of the financial planning profession. There are too many CFP certificants to be so under-represented.

Notably, though, the FPA (finally) fully embracing its CFP centricity and (loudly and publicly) taking up its mantle as the membership association for CFP certificants and advocating on behalf of the CFP Marks does not mean acquiescing or subjugating itself to the CFP Board in the process. T

he FPA already takes lobbying issues to the SEC and FINRA, even though its members are RIAs and registered representatives; the fact that the FPA lobbies against certain policies of the regulators doesn’t change the fact that members are still expected to be registered with those regulators, and the same would be true of encouraging financial planners to be CFP certificants while advocating on their behalf against the CFP Board when apporpriate.

In fact, the whole point of embracing CFP centricity is that by having more CFP certificants the FPA shifts the balance of power back into its favor, to be able to hold its own against the CFP Board and advocate even more effectively, because in advocacy the reality is that numbers equals power. The Financial Services Institute recognized this, rapidly gained power in lobbying to FINRA because it has gathered nearly 37,000 registered representatives as members, and so too can the FPA (re-)gain power by trying to rapidly add more CFP certificants to its ranks in order to represent them.

Of course, it’s worth noting again that from the perspective of a CFP certificant, if the FPA cannot step up to the task and ultimately topples, the loss of the FPA isn’t necessarily a bad thing. A potential consolidation of the credentialing body and the membership association allows for a better pooling of resources, more coordinated advocacy and lobbying efforts, likely lower costs for CFP certificants who are FPA members and can just pay one fee instead of two, and the unification of the two could actually become a superior CFP-centric membership association than what the ICFP was and what the FPA was intended to be.

Again, though, the greatest caveat to the elimination of the FPA and a consolidation of the profession’s power within/behind the CFP Board is the fact that with the FPA out of the way, it becomes increasingly difficult for CFP certificants to push back against the CFP Board in an organized and coherent manner when the CFP board does something objectionable, as it has been wont to do from time to time over the years.

Which means that ultimately, the FPA’s best path to survival at this point may be to explicitly capitalize on the collective nervousness of the CFP certificant community about what happens when the CFP Board goes “unchecked” for too long. Instead, FPA can solicit members on the basis of being that organization which can advocate for their interests against the CFP Board when necessary while also striving to help their members be successful in other ways as well, and advancing the CFP marks as the center of the financial planning profession in accordance with the FPA bylaws.

The bottom line is this: with the ongoing growth in CFP certificants, it is simply impossible for 70,000+ professionals to not have a membership and advocacy association dedicated solely and entirely to their needs.

The FPA is at a crossroads about whether to step up and fully embrace the vision of the IAFP and ICFP merger Can it loudly, proudly and publicly be the membership association of CFP certificants and those who support the financial planning profession with the CFP certification at its center?Or will itrisk being made irrelevant as its financial resources continue to dwindle and its power continues to wane, until eventually the CFP Board or some other competitor steps up to fill the CFP certificant membership void on its own terms.