Advisers are failing to cough up the cash to pump into trade bodies, which will inevitably result in smaller bodies being swallowed up by larger ones - and the adviser voice being weakened in the process, writes Hannah Godfrey
On 8 May, the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) announced plans to create the Investment Management and Financial Advice Association (IMFA) with effect from 1 June.
Under the plans WMA would "absorb" the business and membership of APFA and then change its name to IMFA.
The proposals, which are reminiscent of the Institute of Financial Planning's merger with the Chartered Institute for Securities & Investment in late 2015, look to be financially motivated.
According to its annual reports, APFA's turnover, which is calculated based on a combination of subscriptions and event income, dramatically decreased over the past decade, from £1.5m in 2008 to £566,802 in 2016 - a 62.4% decrease in funding over nine years.
By comparison, the WMA had a turnover of £1.9m in 2015 - more than double APFA's £722,041 that same year.
The two bodies expect the IMFA to be financially positive on a standalone basis by the end of the first year.
Director general of adviser trade body Libertatem, Garry Heath, said unless advisers "put their hands in their pockets"; it was inevitable that such mergers would happen and small trade bodies would disappear into bigger organisations.
He said: "The money is there, but the appetite is not. If everyone paid their whack, which would require around £100 per adviser, then we could have a trade association with a turnover of around £3.5m - but that requires everyone to turn up to the party.
"At no point since I've been doing this in the past 30-odd years has more than 25% of the adviser community turned up."
Heath explained APFA's drop in income meant it had fewer members, which led to fewer sponsors and then an eventual decimation of the body. He warned the organisation would end up losing its voice in the bigger body, however.
"That is what the numbers say. They're going off somewhere where they will very much be a minority interest," he said.
'A small union has no power'
Yellowtail Financial Planning founder and APFA member Dennis Hall voted for the merger despite initial scepticism. Similarly to Heath, he felt the issue came down to funding. But he was concerned that without the merger, a body for financial advisers may cease to exist when funding dried up.
He said: "If you're a small union you've got no power, but if you're a large union, people start to listen to you. If there was a strong and cohesive voice, people surely should have to sit up and listen, because that one big solid voice can get out into the press, can begin to make waves, and ask questions; but we don't have that influence at the moment."
Hall felt although advisers were interested in APFA, funding a trade body wasn't likely to be high on their list of priorities if they did not run their own firms.
"As an owner of a firm, I've been more willing to put my firm's money into this and Libertatem," he said. "I can see there's a need to do that - but I'd have needed a lot more convincing as an employee."
Financial planning firm Wealthflow founder Duncan Glassey also said funding was a big problem. He felt commercial ability would be the driving force for mergers "in the short term.
"I hope niche firms come together and find a way to support one another," said Glassey, "I think there's a big disconnect with big organisations coming together and trying to support everyone in the financial services profession, and I'm very concerned that there is a lot of different types of firms trying to achieve different things in the financial services sector.
"Can one body or a couple of large bodies really service such a broad spectrum of services and firms? I'm not sure."
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