Industry groups feeling the pinch from the economy

The economic downturn is hurting the associations that represent financial planners, investment advisers and big brokerages. Membership has fallen about 10% at both the Financial Planning Association and the Investment Adviser Association, and is off slightly at the Securities Industry and Financial Markets Association. At the National Association of Personal Financial Advisors, membership growth has slowed, and conference revenue is down. FPA membership has shrunk to 25,000 since June 2008, when the organization began seeing sharp declines, said Marv Tuttle, its executive director and chief executive. “The economic crisis has had an impact on our members, their revenues from managing portfolios and expected financial planning fees,” he said.
“Those have been affected within the period of the economic crisis. That trickles down to some of their discretionary spending to membership organizations like FPA,” Mr. Tuttle said. From June 2008 through last Thursday, the total cumulative return for the S&P 500 had dropped 21%, according to data supplied by Morningstar Inc. In addition to being directly hit by the economic downturn, the FPA has lost members as planners have retired. New membership hasn't kept pace, Mr. Tuttle said. But he said that the FPA is “seeing some stabilization” in membership decline. Still, the organization's budget for the fiscal year that began June 1 was down 19% to $14.5 million, from $18 million a year earlier. The FPA laid off 12 staff members in January and currently employs 65 people. While NAPFA's membership has not dropped, growth has slowed, said Ellen Turf, chief executive of the organization for fee-only planners. Membership is now about 2,200, up 5% from about 2,100 last year. But membership had been growing by about 10% to 15% a year, she said. “We're happy not to have lost members,” Ms. Turf said.

NAPFA HIT

NAPFA's conference revenue has taken a big hit and is now 6% under budget for the current fiscal year, Ms. Turf said. She did not provide conference revenue figures. To cover NAPFA's $4 million fiscal 2010 budget, which remained the same as in fiscal 2009, its board of directors decided in September to implement a dues increase that originally had been planned for January 2009, but was put on hold because of the poor economy. NAPFA members currently pay $475 per year. That will rise to $525 in January to $575 in January 2011. The IAA's 2009 budget had to be adjusted after 80 companies did not renew IAA membership at the beginning of this year, said David Tittsworth, executive director and executive vice president of the organization. Membership dues account for about 80% of the budget of the IAA, which represents federally registered investment advisory firms. Mr. Tittsworth declined to disclose how much the membership drop had reduced the IAA's budget for this year. “We took a direct hit,” he said. IAA's revenue in 2008 was $3.4 million. “We budgeted for that,” he said, referring to drop in revenue. “We knew the biggest economic disaster of our lifetimes would have an impact on our firms and our organization.” The IAA had 520 member firms at the end of 2008. Thirty firms have joined as the year has gone on, putting current membership at 470 firms, Mr. Tittsworth said. The IAA is stressing the need for its members to be engaged in the Washington debate as financial service regulatory reform takes shape, he added. “They're looking at the most profound changes since 1940.” Andrew DeSouza, a spokesman for SIFMA, said he was unable to supply membership numbers for the association because its members change frequently. However, “it has dropped since a little over a year ago,” he wrote in an e-mail. “With the financial crisis and economic downturn our membership has changed, as have many trade associations within the industry,” Mr. DeSouza wrote. SIFMA, which laid off 25 people in October 2008, recently hired several new staff members, including Ken Bentsen, its executive vice president of public policy and advocacy, who heads the Washington office. SIFMA is “in a strong position to move forward,” Mr. DeSouza wrote. “Our member firms recognize the important role SIFMA plays, especially during this crucial time of regulatory reform.”

FSI MEMBERSHIP UP

Not all of the associations that represent financial service industry firms are suffering, however. The Financial Services Institute Inc. has added three new broker-dealers to bring its membership to 116 companies, said Dale Brown, president of the organization, which represents independent-contractor firms and their advisers. Financial adviser membership was also up — to 11,200 at the end of September, compared with about 10,000 at the end of 2008, he said. Although attendance at FSI's January conference was down to 540 from 560 the previous year, the organization is on track to exceed the $3.2 million in revenue it budgeted for 2009, Mr. Brown said. “If the impact of the economy is fewer members or revenues, we have not experienced that,” he said. “Our members recognize the importance of being engaged in advocacy.” The overall impact of the economic downturn on associations is “industry specific,” John Graham, president and chief executive of the American Society of Association Executives, wrote in an e-mail. Associations affiliated with the housing industry would likely show a slowdown as that sector of the economy declines, he wrote. While the economy is positions for recovery, “Associations ... are typically a late indicator of the economy and it may be another year before we see any improvements,” Mr. Graham wrote. E-mail Sara Hansard at shansard@investmentnews.com.