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Member Benefits

As I was writing the lead article for this issue of Inside Information, I came back to a question that I’ve been pondering ever since I worked at the International Association for Financial Planning back in the 1980s: what is the purpose of a professional association? 

The easy answer is: to serve the members—and I would argue that some associations, including, for a couple of decades, the Financial Planning Association, have gotten that backwards, and somehow assume that their own health and viability is of key importance to the profession.  I remember, from personal experience, when the IAFP made that same mistake; its members were reeling from tax reform, Black Monday and the collapse of billions in limited partnership investments, and the organization responded by cutting its budget and staff—and services—and retreated into a shell until the smoke cleared. 

A professional association’s existence only matters if it is, itself, key to the health and viability of the firms that make up the profession.  The organization has to play a role subordinate to its members.  It has to benefit them.  Otherwise, I would argue, its own health is irrelevant.

Benefit how?  Certainly the particulars are different for every organization and every profession those organizations serve, and the key benefits change over time.  Today, I would argue that the most important benefit a professional association in our space can provide is communication among its members—that is, to be a central hub of information and discussion about everything from particular client issues to the broad issues facing everybody, like regulation, helping clients navigate the markets and what the hell do we do about crypto?

The lines of communication today might include vibrant forums and online discussion groups where there the association has attracted a high level of membership participation (hat tip to NAPFA), plus local in-person meetings (NAPFA-organized mix groups or FPA chapter meetings), plus national meetings where there is an opportunity to bring together more prominent speakers on bigger topics (BIG hat tip to the AICPA PFP Section, another hat tip to NAPFA and something I am told the FPA is working hard on).  Higher levels of information quality will drive higher levels of participation. 

I would argue that the holy grail of the communication hub role is successfully facilitating a shared sense of community among the members.

In addition, an association is fundamentally a shared resource, a pooling of the membership dues.  The idea behind the pooling is that the organization, as a whole, can do things that the individual members cannot do on their own—kind of like no citizen of the U.S. could create an army to protect them from outside invaders or build highways on their own.  The FPA’s externship program could not have been executed by any individual advisory firm. 

An association can use its bargaining power to negotiate discounts on the software and services that its members use in their business lives (the AICPA PFP Section has done a remarkable job of this), and hire lobbyists to advocate for the interests of the members with regulators and elected representatives (does anybody stand out in this area today?).  It can create business opportunities by operating a vibrant referral network, where consumers can find company profiles, connect and ultimately hire a planner to help them address their financial issues.  (Another hat tip to NAPFA.)

An association can contract with thought leaders who can offer insights and updates to the membership at large, not just through the conferences, but perhaps also in a webinar format.  (Another hat tip to the AICPA PFP Section.)

The guiding star of all of this is the overall health of the profession.  The temperature of water is fundamentally a measure of the average amount of heat contained in each molecule.  The health of a profession is a composite of the individual circumstances of the different advisors and firms that make it up.  But I would also argue that an association has an obligation to continually try to raise the quality of those advisors and firms, to set standards and include only the entities (advisor or firm) that meet those standards.  This, too, is tending the health of the profession, by raising its overall credibility in the marketplace.

There are a variety of ways to do this.  The CFA Institute and the Investments & Wealth Institute facilitate their own professional designations, while NAPFA enforces fiduciary and fee-only membership criteria.  All of the professional organizations have a code of ethics, though I have to say that the enforcement has been spotty with some of them.  (One might say this is true of the regulators as well.)

Despite my obvious (obnoxious?) nitpicking, I think that the financial planning profession is actually pretty lucky to have so many associations competing for your annual dues.  Professions that have evolved down to one single association are at risk of what might be called ‘association complacency,’ and any profession’s ability to evolve more and better ways of doing things may be stunted if it lacks competing visions of what the profession should be or where it should evolve to next. 

Our existing associations are going to play an important role in the still-unfinished process of creating a real profession of financial planning, and I expect them to embrace that challenge going forward.