liquid dollar sign / phive2015

The most recent financial statements for Advocis, the national financial advisors association, indicate it took steps to address liquidity after reporting its largest net loss in recent years.

This summer, Advocis released its annual report with financial statement summaries showing expenses exceeded revenues by $2.5 million for the 2022 fiscal year. (The amount includes $571,000 in net unrealized losses on investments and a $256,000 gain from Advocis Broker Services). The negative result is the largest since fiscal 2017 as the association updated its education programs, invested in infrastructure and dealt with pandemic fallout.

“The financial results of 2022 have put a strain on the financial resources and liquidity of [the association],” notes to the financial statements said.

The statements said that, since year-end, Advocis raised cash by increasing its line of credit to $500,000, arranging a loan of $610,000 against the cash surrender value of life insurance policies held, and establishing a $1.7-million line of credit from the Century Initiative Fund, from which it also received support.

The Century Initiative was created in 2006 to ensure the association’s capitalization and is funded with premium membership fees. Its balance was $5.5 million at the end of last year, and the fund has contributed $1.5 million to various Advocis initiatives over the past five years, the annual report said.

Advocis’s financials said the association is also in the process of completing a “restructuring plan” to “reduce operating expenses and provide a sound financial base for the organization.”

In a statement emailed to Investment Executive, Advocis said that “2022 was a challenging year for Advocis and so many other organizations across Canada. We are still feeling the impact of the pandemic and are adapting our operations to better reflect that reality.”

Operating costs were up 12% year over year, the annual report said. Additional costs were incurred with the shift to hybrid events post-pandemic, and as the organization’s subsidiary, the Institute for Advanced Financial Education, became a credentialing body under Ontario’s new title protection regime.

On the other side of the ledger, revenue from membership fees, relatively flat in recent years, took a hit in 2020 with the pandemic and hasn’t recovered. “Natural attrition and industry demographic shifts along with rising inflation left growing membership challenging,” the report said. Demand for education was also down and was attributed to the pandemic.

“We remain confident in the value that we deliver to our members, clients and corporate partners across Canada — and of their ongoing support of the association,” Advocis said in its statement.

The Financial Services Regulatory Authority of Ontario, which oversees credentialing bodies in the province, has said its supervision approach for 2023–24 will focus on four areas, one of which is how credentialing bodies are prepared to handle increased demands on their resources.