Expecting a budget shortfall for the coming fiscal year of $2.7 million, the Financial Planning Association has cut operating expenses and 12% of its workforce, or 10 full-time staff positions, and may need to make further budget cuts.
Marvin W. Tuttle Jr., FPA's executive director and CEO, said in an interview that the belt tightening FPA is going through is significantly worse than what the association faced in 2002-2003, after the 9/11 terror attacks. FPA cut its budget about $1.5 million during that period and that was enough to get through the tough times, he says, but he is concerned the $2.7 million may not be enough for the 2009-2010 fiscal year. The FPA will be watching things closely but won't make a decision on further cuts for at least the next 45 days, he says.
Meanwhile, Tuttle says, FPA has been hearing from many advisors about the difficulties they are facing from the economic downturn. "The vast majority of our members are suffering from this as well and some worse than others," he notes. The FPA will begin offering a weekly virtual learning series beginning some time later this month to help advisors weather the downturn, he says.
For the 2009-2010 fiscal year, the FPA board felt it needed to be proactive to mitigate any potential future loss resulting from the uncertain and unstable economic conditions already affecting FPA members and corporate partners, says Tuttle in a recent letter to members and in a release posted at the FPA's Web site. FPA's board of directors approved the new budget plan on January 19.
To offset the projected $2.7 million deficit, FPA's reorganization plan includes cuts of $2 million in operating expenses and nearly $700,000 in compensation. The FPA came up with the expected shortfall by evaluating current market trends and looking at how market declines have impacted it in the past.
Two-thirds of the deficit comes from a projected $1.8 million drop in corporate participation, which includes advertising, sponsorships, conference exhibitors and group memberships. Another 9% is the forecasted decline in conference registrations and 25% is from FPA's increased infrastructure expenses for shoring up technology and resulting depreciation costs. FPA expects to achieve its budgeted goals for the 2008/2009 fiscal year, Tuttle adds.
The association dues increase in June has led to a membership decline of slightly higher than 4%. "Some may incorrectly assume that the cuts we are making to the new fiscal year's budget are directly related to a drop off in membership as a result of the recent dues increase and financial crisis," Tuttle says in the letter. "While it is true that we have seen a slight decrease in retention and a slowing of new members coming on board, FPA's membership is only down slightly with total roster at 28,000."
Tuttle adds, "FPA is part of the vicious cycle we are all experiencing in these unprecedented times. As you do for your clients, we are planning for the future and being proactive in taking steps to offset potential revenue declines so that the member experience is not compromised."
He notes that additional future reductions to operating and compensation costs may be needed, and the FPA will watch revenue trends over the next several months to see how it can manage expenses in key programs without hampering member service and quality.
"We strive to be as proactive and transparent in our communications with you, our member, as we possibly can be. We will continue to move forward as the leading membership and advocacy organization for the financial planning profession," he comments.