As I walked through the FPA Experience convention in San Diego six weeks ago, there was something oddly familiar about the scene. The hall was full of insurance companies selling investment products. There were big, generic, load mutual fund companies that are better at marketing than generating investment returns, and non-traded REIT companies offering basically illiquid investments.
Hey, wasn't that somebody who used to work at the Stanger Register in those olden days when it was evaluating tax shelter deal terms? What was it that was so familiar? One morning, "exhibitor presentations" told us how to sell the speaker's products - including (here they were again) non-traded REITs. An author was signing books about the value of indexed annuities in client portfolios. Top producers at Ameriprise Financial gave us the secrets of their success. A company called First Command had a presentation titled, "Selling Effectively to Women." Wasn't that the same organization that paid a big fine to the SEC some years back and promised to stop deceptive sales practices to members of the military?
TIME WARP
I winced every time I heard people call this an "industry" rather than a "profession." Suddenly, I connected with the oddly familiar feeling. Lavish booths, limited partnerships, cozy vendor/association relationships, industry rather than profession - had I wandered into a time warp? This was the International Association for Financial Planning all over again! If a tax shelter salesman from the late 1980s were transported to the FPA convention of 2011, he might have felt right at home.
As it happens, I spent almost nine years of my life working at the IAFP, and have many fond memories. But when the FPA was formed out of the IAFP and the Institute of Certified Financial Planners, this is exactly what was not envisioned. The framers of the merger had a profession-centric vision. The deal stipulated that, within a set period of time, you would have to earn the CFP designation to enjoy full membership. A lot of us thought this would be the end of those cozy wink-wink, nod-nod relationships between the trade organization and the product vendors.
As the merger was put up for a vote, a number of advisors on the ICFP side predicted exactly the outcome I was seeing in San Diego. I remember the late Henry Montgomery invoking what he called "the golden rule" as he prophesied the slow death of the professional association culture. "Those who have the gold end up making the rules," the Kemp Fain Award winner told me. As Montgomery wondered, when the doors are open to everybody and their dog (a sly reference to the fact that a dog was briefly a dues-paying member of the IAFP), then what does an organization really stand for?
A lot of former ICFP members are still experiencing a sense of loss, and the FPA has developed a slow leak in membership. How did this happen? It seems clear the vision of a succession of FPA boards has not wavered from that original profession-centric ideal, which was strongly articulated, once again, in the conference's opening speech by outgoing president Marty Kurtz.
HORSE TRADING
I think there have been two problems. However loudly and often its leaders say the FPA is all about strong values, the reality in a trade organization is that the doors are open to anybody and nobody is monitoring members' behavior. When you sit at a chapter meeting next to that embarrassing fellow who's repeatedly been in regulatory trouble, or the sales team that sells the heck out of equity-indexed annuities with huge surrender charges, or when you know one of the sponsors is a company that got in trouble for deceptive selling practices to our soldiers, then that trumps the whole values discussion. It makes you feel like FPA membership really doesn't mean anything important.
The half-measures have only made this problem worse. When the FPA says only CFP professionals can participate in its referral program, that does nothing to appease the former ICFP-ers, while it alienates the non-CFP audience.
FUMBLING THE BALL
A more serious problem has been execution at the staff level. An association basically has two value propositions: passion and benefits. Trade associations, by their nature, have trouble exciting the passions of their members, but they can make up for it by aggregating the dues of their members and using that money to deliver valuable practice-enhancing services no single member could afford on her own. In this area, I think the FPA has fallen apart.
The new book publishing division turned into a disaster, with no marketing effort and lackluster quality control. After a lot of expensive communication features were built into the FPA's website, the staff proved to be ineffective at driving traffic or generating discussions. The Journal of Financial Planning gave its highest award to a bogus article that was published and eventually retracted. Don't get me started on the recently introduced "research" initiatives.
The result of all this has been a long, slow decline in membership enthusiasm, membership numbers and revenues. When people send the FPA their dues and get little or nothing in return, even heroic efforts at the local chapter can't stem the ebbing tide.
I remember this dynamic from my days at the IAFP when the tax shelters blew up. If membership numbers drop, a trade organization opens the doors a little wider and tries to attract people who perhaps aren't exactly professionals, but their money is good; it cuts back on expenses, which erodes member benefits; it becomes a little more dependent on product vendors - but, of course, those who want to cut a deal are not the great companies that can win hearts and minds without any help from the FPA. The need for new revenues erodes standards. Those who have the gold start making the rules.
Is there a way out of this downward spiral? Yes, but it requires the kind of execution you don't see at the FPA home office. When you talk with people who've done business with the FPA, the normal response is: "I could never figure out who was in charge, and nobody seemed to be able to make a decision. They talk a great game and work hard, but they never seem to be accomplishing very much."
WHO'S IN CHARGE HERE?
The membership slump won't trigger a return to the original FPA vision; the doors have been open too wide for too long for the organization to become a professional association and recapture the old ICFP spirit. Kurtz was right when he said in his speech that we need to look forward, not back.
But there is no reason the FPA can't produce great, important books or have knowledgeable staff host terrific, rich debates in the FPA discussion environment. The Journal would get more readership if it tightened up its peer review process and not feature (as it did recently) a transparent sales pitch for equity-indexed annuities, whose claims were embarrassingly (but convincingly) rebutted in the Journal's own pages two months later.
This would require the FPA board to take on a role it seems to have been uncomfortable with in the past. It would have to hold the home office staff accountable for execution. Exactly whose responsibility is it to find a way to make those rich, interesting discussions happen? If they aren't happening, is that person's job on the line? Whose job is it to develop genuinely helpful member benefits, like research that asks more perceptive questions than whether members use mutual funds in client portfolios? Have that person's feet been held to the fire? In my view, the FPA board has exhibited almost saintlike patience with CEO Marvin Tuttle while the organization has been faltering. Does the buck stop with him, or elsewhere?
All of this might be less personally painful if, back in 2000, I hadn't predicted that the ICFP would eventually become the dominant culture of the FPA. At the time, I rejoiced that we were eliminating the bickering between the newly merged organizations. I boldly told my readers that we were creating out of chaos a unified profession-centric association, that we were leaving the old trade association sales culture behind.
I helped sell that merger to the ICFP loyalists who correctly envisioned the demise of their beloved professional organization. Henry Montgomery, wherever you are now, I owe you a heartfelt apology. You were right after all.
Bob Veres, a Financial Planning columnist, writes and publishes the Inside Information service for financial planners at bobveres.com.
