Advocis defends fee increases

(December 7, 2004) Advocis president Steve Howard says the country’s biggest advisor association had no choice but to substantially raise its membership fees for 2005 in order to effectively promote its efforts to overhaul the regulatory system.

The increase has generated hostility among some advisors, who feel the increase — as much as double in some cases — is not justified and does not provide enough value for members. Advocis fees in 2004 for non-designated members were $529, while those with the CFP or CLU designation paid $288.

For 2005, non-designated and CLU members will pay $744 while those with the CFP will pay $586.

“We knew that the increase was substantial and we knew certain members would react negatively,” Howard says. “But the board was pretty confident that when the message got out, members would come to see it as an appropriate action.”

Howard says Advocis needs to “bulk up” to deal with its regulatory platform, pointing out that the association is dealing with powerful regulators, like the Ontario Securities Commission, which has a $40 million payroll and more than 100 staffers who are lawyers and policy analysts.

“We need to have the corresponding level of resources to participate in those discussions,” he insists. “We’re doubling our advocacy and public affairs costs next year, we didn’t see any alternative but to increase the fees and still be able to break even.”

Still, Howard concedes that not all Advocis members fully understand Advocis’ regulatory strategy. To rectify that, the association has organized a series of town hall meetings, starting in January.

“It is an insightful and original solution and we think it solves a lot of the problems that we have in Canada,” says Howard, “The difficulty is that although it’s fairly simple at a high level, when you get down to the working aspects, that takes a lot of committee work and legal counsel to provide the details.”

Under the Advocis proposal, securities regulators would continue to regulate the distribution of financial products while financial advice would be regulated by an independent professional body, which would set standards for advisors, such as a requirement to hold a professional designation, adhere to codes of conduct and practice standards, acquire continuing education credits and maintain errors and omissions insurance coverage.

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As for value for money, Howard says fees include complimentary attendance at best practices seminars at Advocis chapters across the country. In addition, Advocis will soon be rolling out its own in-house errors and omissions insurance program.

“The kind of rate reduction that advisors can expect should more than compensate for the fee increases,” Howard says. “It’s unfortunate timing, but advisors do have that to look forward to next year and the years beyond.”

And Howard says the fee increase has nothing to do with Advocis’ failure to meet its ambitious target for attracting new members this year. “Our slogan was 2004 in 2004. We wanted to launch that in May, but we decided to wait until the fall. So we were a few months late in starting, but we did in fact pick up a number of new members through the year.”

Advocis membership is currently at just over 15,000, Howard says, down from about 17,000 when CAIFA and CAFP merged to create Advocis in 2002.

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The Advocis fee increase has already generated lots of discussion, both positive and negative, on our online forum. To join the debate, please go to the Talvest Town Hall on Advisor.ca.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com

(12/07/04)

Doug Watt