FSRA is core of systemic failures: NIA

The Financial Services Reform Act (FSRA) has created an industry structure that deprives consumers of non-product based advice, according to the National Institute of Accountants (NIA).

The way the financial advice industry has been structured under FSRA is at the root of recent systemic failures, and as such a review and restructure of the entire system is required, according to the NIA.

In its submission to the Ripoll inquiry, the NIA expressed concern over the industry structure created by the FSRA, which is “more focused on regulating entities rather than creating a system of independent advisers”. This has resulted in a system “bogged down in paperwork and regulations”, without ensuring that the advice given is useful to the client.

Those who wish to give advice are beholden to complex disclosure requirements, the NIA said.

“This may sound fine from a regulatory point of view, but from a commercial point of view it is disastrous.”

The NIA said the “only way money can be recouped by advisers is through selling a large amount of product and not wasting time on non-commercial generic advice”.

“Therefore, the adviser must be either licensed and need to sell product, or they are not licensed and cannot say much of anything,” the NIA said.

“This is leaving a hole where clients need information the most: of a generic, non-product based variety.”

Among its recommendations to the committee, the NIA proposed a three-tiered structure for financial advisers, with each tier licensed to provide different types of advice.