Financial advisers will have to make “a clear distinction between advice and sales” in new proposed regulations outlined by the Financial Services Authority (FSA). The regulations reflect a long-held concern that financial advisers simply sell products to clients to make as much money as possible from commission fees.

Currently there are three main types of financial adviser.

Tied advisers are those who only recommend products from one company, usually a bank. Multi-tied advisers recommend products from a panel of companies. Advisers at Barclays, for example, recommend products from 14 providers. Finally, independent financial advisers (IFAs) can access the whole market and should recommend the products best suited to their clients.

All of these advisers can receive commission from banks, insurance companies or pension providers when their clients take out a recommended product.

But the FSA is now proposing that anyone who is tied to a particular company can no longer operate under the label of adviser and will presumably have to adopt the title sales consultant, or something similar. It also suggests that anyone deemed to be independent, such as IFAs, will no longer be able to accept commission when they sell products.

While consumer groups have welcomed the FSA proposals, the suggested rule changes have caused great consternation among banks, whose in-house “advisers” are a key source of revenue.

Adam Phillips, of the Financial Services Consumer Panel, says: “We have continually emphasised the need for people to be able to obtain independent advice that is not influenced by how much commission financial advisers earn. We are keen to see the industry embrace these ideas and deliver positive change for consumers.”

The FSA's proposals are part of a review aimed at finding “more costeffective ways of making advice available to a wider range of consumers”.

Chris Cummings, of the Association of Independent Financial Advisers (AIFA), says that the review is in response to consumers' widespread mistrust of financial services and advisers. “Millions of people in the UK are not maximising their pensions, savings or investments because they do not trust financial services and advisers,” he says. “People are not getting the right advice, which ultimately means that they are less financially secure.”

The distrust of financial advisers is understandable. From taking out mortgage endowments to opting out of final-salary pension schemes, millions of consumers have made bad decisions based on poor advice from the so-called experts.

In 2003 and 2004 the FSA fined Lloyds TSB, Capita Trust and Bradford & Bingley for mis-selling “precipice” bonds to customers without explaining the full financial risks. Hundreds of thousands of people lost money on these risky high-income investments when the stock market started to tumble in 2000 - most had taken them out on the recommendation of bank advisers.

In a damning investigation by Which?, the consumer group, last year, two thirds of tied financial advisers failed to pass all the tests for giving good advice. Which? assessed advisers on how they explained their services, collected information and established an individual's attitude to risk, as well as what the advisers recommended. Only 32 per cent of tied advisers passed all the benchmarks. Independent advisers did not fare much better, with an overall pass rate of 48 per cent. More worryingly, 82 per cent of all advisers failed to give a precise explanation of their payment structures.

Neil Fowler, of Which?, says: “For more complex financial products, such as investments, mortgages and pensions, you really should see an adviser unless you are confident that you understand the market. But with a shocking number of advisers failing our test, it is clear that you need to choose your adviser very carefully.”

With the FSA's new rules unlikely to come into effect for another year or so, it is important to remain vigilant. The adviser you choose will depend on your needs. Nick Cann, of the Institute of Financial Planning, says: “If your needs are restricted to a particular aspect of your finances - such as arranging life insurance or tax planning - then you should seek out an IFA with the specialist skills that are required.”

Check that this adviser has at least three years' experience and more qualifications than the minimum, preferably the Financial Planning Society's diploma (DipPFS) or associateship (APFS) or Certified Financial Planner (CFP) status. Also check if your adviser is a member of a professional body. Mr Cann adds: “If you need someone to help you to create a full financial plan, which includes attaining all your financial and lifestyle objectives over the long term, then you should seek out a CFP. This is an advanced qualification given to those who have already passed DipPFS.”

CFPs provide more thorough, long-term strategic planning than an IFA. They aim to offer a more “holistic” approach to financial advice, taking into account long-term objectives, rather than only advising on, say, a pension or insurance policy.

Like IFAs, CFPs can charge an upfront fee, which could be anything from £100 to £300 an hour and/or a continuing service charge, which could be between 0.5 per cent and 1 per cent of your assets. As with all advisers, ask for a clear breakdown of how you will be charged.

How to do your own research

If you do not want to pay for financial advice, there are plenty of places to do your own research.

For savings advice, a number of websites, including Times Money have best-buy tables on all types of savings accounts, from Isas to Child Trust Funds.

To research your investments, the timesonline.co.uk/invest has prices and detailed market data, including director's dealings, on all FTSE 100, FTSE 250 and AIM-listed companies. The funds page at timesonline.co.uk/funds also allows you to research all UK funds and compare the best performers by sector and manager over three, five and ten years.

The websites of the independent financial advisers Hargreaves Lansdown (www.h-l.co.uk ) and Best Invest (www.bestinvest.co.uk ) also provide useful tools for those hoping to find out more information about investments.

Lifesearch.co.uk allows you to obtain quotes on life insurance, income protection, critical-illness cover and whole-of-life insurance. Lifesearch also provides a free helpline to answer your questions.

The Pensions Advisory Service (TPAS) runs a helpline that offers free and independent advice on all aspects of state, private or occupational pensions. Although the TPAS experts will not recommend any specific products, they can arm you with enough information to make the right choice. The TPAS helpline is on 0845 6012923 and is open Monday to Friday from 9am to 5pm.

Case Study

Kate Ringshaw, 44, and her husband, Keith, 55, a self-employed computer contractor, have used a financial planner for two years.

The Ringshaws have two children, Lucy, 12, and Guy, 7, and wanted comprehensive advice on how to secure their family's long-term future. They hired a financial planner at Broadway Financial Planning in 2006 for advice on their pensions, investments and protection.

Mrs Ringshaw, pictured with Lucy and Guy, says: “In the past, a few advisers have merely given a hard sell without thinking about whether or not the product is suitable for us. But our planner charges upfront fees and works on a commission-offset basis, which means that most of our fees have been paid by the commission that she has received from the products she has recommended.”

After cancelling some policies, taking out new ones and reviewing their pensions, the Ringshaws are now much more confident about their future security. They have an annual review with their financial planner to assess whether or not their policies are still suitable.