AIOFP Network Brief

March 2009

The Association of Independently Owned Financial Planners (AIOFP) was originally formed in South Australia in 1997 by three financial planning practices and formerly registered in 1998. Its constitution is similar to the Financial Planning Assocation (FPA), however, it’s adjusted to suit the needs of independently owned financial practices. The directors of Goldsborough Financial Services Pty Ltd, Intervest Securities Pty Ltd and Seagrim Financial Planning Pty Ltd acknowledged that they rarely competed against each other in the marketplace and that the institutionally owned dealers and industry funds were the real “enemy”. The concept was then introduced to the other states where all members now freely share information in an inclusive professional environment. Our membership now stands around 160 practices representing in excess of $30 billion of FUA and over 2200 advisers nationally. We are the largest financial planning association for the independently owned sector in the country.

Even though we all acknowledge that the FPA is useful in some respects, it cannot satisfy the needs of independently owned practices due to the dominance of the institutions in its membership. Institutionally owned advisers now comprise 80% of the advice marketplace. One of our primary objectives is to differentiate ourselves to give consumers clarity and understanding.

From day one AIOFP was designed to be commercially focused. Furthering the commercial interest of its members is the Board’s primary objective. Our intent is to make money for our members, not out of our members. Although AIOFP member clients’ interests are foremost in our minds, we do not have an altruistic, broadly focused consumer culture. In recent times the Board has seen the necessity to form and project a political position on a range of issues that will affect the day to day operations of our members.

Member eligibility requirements initially demanded five authorised representatives, principal FPA membership, independent ownership and an Australian Financial Services Licence (AFSL). This has been relaxed in recent times to allow less than five authorised representatives and it’s not compulsory to hold FPA principal membership. Although we have a number of 100+ advisers/practices within our membership, the profile of the average member has around 5 advisers.

Please note that we do not profess to be the “Independents” as defined under section 323A of the Act. Our name clearly demonstrates what we are. Members operate on their own fee for service/brokerage/commission basis that suits their individual circumstances. Market and political pressure in recent times encouraged the AIOFP Board to propose a resolution at our 2008 Gold Coast conference where all members were encouraged to move towards a genuine fee for service model. The model unanimously endorsed by the members is relatively simple and flexible. It is based on the adviser negotiating directly with the client and clearly expressing the fee in dollar terms to transact the service. A percentage, hourly rate or flat fee is then either invoiced directly to the client, deducted from a bank account or placed on a platform, superannuation fund or similar structure. After the fee has been negotiated and the overall strategy put in place the adviser then selects the best products to suit the client’s circumstances and rebates any commissions if applicable. This model was put to both Minister Nick Sherry and Treasurer Wayne Swan during the conference and approval was granted from both.

We have learnt that pooling our collective commercial strength can provide additional benefits that would not normally be available to politically/commercially isolated practices. Remember the old union adage “divided we beg, together we negotiate”! Over the past ten years we have proven this to be correct.

Principal Membership Benefits

Principal membership gives member practices the following for $750.00 plus GST per year. Please note this fee is per practice not per adviser.

Networking

Arguably the most popular feature is the information sharing with like-minded individuals from both within their own state and around Australia. Compliance, management and marketing issues are freely discussed and exchanged throughout the year. If you sometimes feel professionally isolated, AIOFP membership remedies this position.

Branding

An attractive member benefit is displaying our membership logo “sticker” in a prominent place for clients to see. As you may know the ASIC does not allow practices to incorporate the word “independent or independently owned” in any promotional material unless they work strictly on a fee for service with no commission/trail basis. AIOFP does not hold an AFS licence allowing us to use the term “independently owned” as it relates to ownership of the practice not advice. Members are quite within their rights to advertise the fact that they are AIOFP Members indirectly relaying the desired message.

Bi-Annual Conferences

The AIOFP Board prides itself on conducting totally relevant conferences with interesting guest speakers and encourages contributions from members. The on-shore conference is held in the last quarter of the year on the Gold Coast and the international conference is held at different locations, typically within a 12 hour flight radius of Australia, during the first quarter of each year. They are nothing like the fund manager “junkets” of old; in fact those who do not attend the sessions get severely reprimanded later that evening! Past guest speakers include ASIC’s Ian Johnston/Pauline Vamos/Jennifer O’Donnell/Jeremy Cooper, Senator Stephen Conroy MP, Senator Ross Cameron MP, Assistant Treasurer Hon Mal Brough MP, Financial Services Minister Chris Pearce MP, Minister Nick Sherry MP and Treasurer Wayne Swan. We always incorporate plenty of social activity to facilitate bonding and information exchange in a relaxed and professional environment.

PI Insurance

We have previously spent many hours educating our brokers and underwriters on the AIOFP member’s point of difference in the marketplace. Our cover is not only price competitive but more importantly, it has minimal exclusions giving maximum protection when it is needed. The world’s largest broking house Marsh Ltd is our appointed advisers/brokers.

Commodity Discounts

We have a number of arrangements in place for substantial discounts on research, software and compliance for our members. Gold Seal is our preferred compliance provider and Xplan wealth management and Coin Financial Software provide up to 30% discount off their retail rate once you become an AIOFP member.

New client opportunities

One of the AIOFP’s major objectives is to deliver new clients to its members. Through the AIOFP’s associated marketing arms, the Australian Financial & Career Consortium Pty Ltd (AFCC) and Choice Career Services Pty Ltd (CCS), we project manage redundancy programs and facilitate executive financial planning services for corporates and their employees. Current clients include Telstra, Visy Industries, Coca-Cola Amatil, Alcoa, Mitsubishi, Holden Ltd, Orica, SA Water, Sugar Australia, Amcor, IES, Air International, various Universities, ACI, OneSteel and the NSW Government.

AFCC and CCS specialise in managing career transition services with a unique business plan that saves corporates considerable revenue. AIOFP members are then appointed to deliver the financial advice where required. We either access corporates via the trade union movement with clauses in enterprise bargaining agreements or market directly to corporates under the AFCC/CCS banner. As you may be aware, corporates rarely appoint financial planning practices to redundancy programs due to the perception of problems if inappropriate advice is dispensed.

AFCC specialises in blue-collar career transition services where it has strategic alliances with a number of trade unions around the nation. CCS specialises in upper white-collar and executive career transition services where we also provide financial planning/strategy services to key executives.

Other Relevant Information

Recently some potential members have enquired into my own expertise and experience in the financial planning industry (also there are so many other Peter Johnston/Johnson/Jonnson’s in the industry it can get confusing). I am the founding Director and shareholder of Goldsborough Financial Services Pty Ltd, an Adelaide based foundation AIOFP member.

Recently my share in Goldsborough was purchased by a listed company thus eliminating any potential conflicts of interest. In 1998 I was seconded by the AIOFP Board to operate the AIOFP on a day to day basis. Venturing into the financial planning industry in 1979, after deciding not to pursue a teaching career (my first job offer was a remote country area), I started with AFT, Telford, and Hooker unlisted Property Trusts as well as the Scottish Amicable and Eagle Bonds. Like most in the industry, after 20 years of servicing clients, the accompanying disasters of the 80’s and 90’s, and compliance demands, I am enjoying my new role away from the “coal face”.

Over the past 10 years we have certainly learnt a lot about the industry by seeing the other side with how fund managers manipulate financial planners with “trinkets and junkets” to capture our clients monies into their own funds. Unfortunately many practising financial planners are so immersed in the day to day operations of their business they sometimes miss key issues. A key objective is to use my 27 years of experience in commercial and political spheres to assist members and their clients to maximise their position in the industry.

In summary, the AIOFP Board’s major objective is to assist its members to efficiently operate their practices through the combined interchange of ideas and experience from its membership throughout Australia with member clients being the ultimate beneficiaries.

Peter Johnston
Executive Director
Association of Independently Owned Financial Planners