The FPA's embrace of the Certified Financial Planner designation alienated non-CFPs, who in the past constituted a large percentage of its members.
The FPA's successful lawsuit against the Securities and Exchange Commission, which led to a ruling that ended the exemption of brokers from registering as an RIA, undoubtedly infuriated its members working at Wall Street brokerages as well as many independent registered reps.
In recent months, the FPA's advocacy for applying to registered reps the same fiduciary standard that now applies to registered investment advisors under the Investment Advisers Act of 1940 again put it at odds with many registered reps and brokerages.
About 60% of the FPA's members are dually registered as RIAs and registered representatives, and many of them do not support applying the '40 Act fiduciary standard to advisory activities.
In addition, the FPA's members are aging and its ranks are not being filled by enough younger members to offset the slide. FPA membership is declining by about 50 members a month.
A factor accounting for the FPA's decline may have been its leadership's decision in 2003 to split off its broker-dealer division, established in 1987 by the IAFP. In doing so, the FPA set up what's now become a rival membership group, the FSI.
The creation of FSI is referred to by some in the industry as the FPA's "spin-off" of its broker-dealer division, but that's a misnomer. A spin-off implies that the FPA received something in exchange for splitting off this segment of the organization, similar to the way shareholders receive the pro rata value of shares in a new company when its parent spins off a line of business. As a 501(c) not-for-profit organization, however, the FPA received nothing in return for separating itself from B-Ds.
"I was in the room when it happened," says Dale Brown, now president and CEO of FSI. "I can tell you exactly what happened."
Brown was one of the principal players in the events leading up to the FPA's decision to split the B-Ds from the FPA. He had begun his career working at the International Association for Financial Planning in 1988 and served as the IAFP's director of government affairs. After the IAFP merger with the ICFP, Brown became the FPA's associate executive director.
"Not long after FPA was formed, it became clear that FPA's advocacy was focusing on advisory issues," says Brown. "Because FPA was created to advocate for financial planning, [the leaders] were reluctant to advocate for B-Ds because it could dilute their message to regulators about the uniqueness and value of financial planning."
In the months following the formation of the FPA in 2000, the tech bubble burst. Stocks would not bottom until 2002, but the mutual fund scandal headlines established new battle lines between B-Ds and many independent advisors, especially those not affiliated with a B-D. These were dark days for B-Ds, as regulators found them complicit in violations ranging from failing to reduce sales loads based on break points to undisclosed revenue-sharing schemes and other sales violations.
With the leadership of the FPA moving toward a professional model that today is manifested in its support of a strong fiduciary standard, it made less and less sense for them to share the podium with B-Ds. After all, the mutual fund and brokerage scandals were providing a marketing bonanza for CFPs unaffiliated with a broker-dealer.