Decisions at that time to make the FPA a planner-centric organization sowed the seeds for the current situation-the rise of the FSI and the weakening of the FPA. In fact, the same professional issues essentially define the two groups today and make them rivals.
The events of the time are well documented in a November 2003 article in Financial Advisor by Editor Evan Simonoff: "Financial planning," he wrote, "now is an emerging profession that has survived a violent bear market and an extended economic slowdown in remarkably good condition. Advisors may have watched their hair turn gray in recent years, but they have unquestionably gained market share."
Reflecting a prevailing sentiment of 2003, Simonoff added, "Many practitioners have businesses that are healthier than the brokerages and financial services companies that helped underwrite much of the profession's early growth."
The mutual fund scandals in 2002 and 2003 underscored the diverging interests of the FPA's B-D division and practitioners in the FPA's leadership. With successful practitioners who supported the professional movement in control of the FPA, the group asked B-Ds to leave in 2003. Though some B-D executives said they had been "jilted," the decision was based on divergent positions on advocacy issues. Simonoff reported: "FPA President David Yeske presented the decision as a fait accompli and said that it 'was born of integrity.'"
The B-Ds were invited to become "corporate members" of the FPA. Some B-D executives were miffed at how the separation was handled by the FPA, but neither side displayed outward animosity or rancor during the decade that followed.
No one at the time envisioned that the B-Ds would create a rival membership organization for registered representatives. Yet that's what happened. Moreover, FSI is throwing its weight behind FINRA to become the self-regulatory organization for RIAs who have more than $100 million under management and are regulated by the SEC. The FPA opposes FINRA as SRO.
The FSI has 126 B-D members with 188,000 registered reps, and 16,000 of those reps are FSI members now. Membership costs between $99 and $129 a year, and Brown says the group advocates for independent advisors affiliated with B-Ds.
The rise of the FSI is dividing the financial advisory business over the same ideological lines that existed in the 1970s and 1980s and separated the IAFP from the ICFP. In a way, it's almost like the merger of the two groups never happened.
Marv Tuttle, the CEO and executive director of the FPA in the years following the merger, describes the period from 2000 to 2008 as "an era of defining clarity of membership purpose clashing with the FPA's desire to position financial planning as a true and legitimate profession."
"Some members did not support our leadership positions," Tuttle adds.