Looking for a secure home for your cash that keeps pace with inflation? You might expect your adviser to suggest index linked savings certificates from National Savings and Investments (NS&I) , backed by the government.

Looking for a low-cost way to track a stock-market index? An adviser worth his salt should at least mention exchange-traded funds (ETFs), which follow the market but can be traded like shares and cost as little as 0.2% a year.

Looking for a low-cost active fund with a good long-term track record? You might expect your adviser to at least research investment trusts, many of which have been managing money for more than 100 years and which generally have lower charges than more popular unit trusts.

However, as the Financial Services Authority (FSA), the City watchdog, acknowledged last week, many consumers never hear about these schemes — at least from their advisers.

Advisers might argue NS&I offers a poor deal, or ETFs are too complex, or investment trusts are more volatile than more popular unit trusts. However, the strong suspicion has to be that it is because these products haven’t historically offered commission — payments made by the product provider to the adviser out of your funds.

Eight years after first admitting that commission leads to biased advice, having been the root cause of everything from pensions mis-selling to precipice bonds, the FSA has finally published firm proposals to do something about the system.

In last week’s retail distribution review, it said advisers who call themselves independent will have to consider the whole market, including unregulated products such as ETFs, investment trusts and structured products (though the FSA is careful not to endorse the latter, which have been behind several scandals themselves).

Commissions will also be banned, with advisers having to agree the cost of advice upfront with their clients. Consumers can then choose to either pay a fee or have the cost deducted from their investment. Crucially, though, the adviser will negotiate the fee with the investor and not the product provider, reducing the scope for bias.

As a result, your adviser should be far more likely to recommend a product that doesn’t pay commission because he gets paid anyway. Often the best advice is not to buy a product at all, and the FSA hopes the new regime will lead to more advisers recommending people pay off debts before pushing a product.

There’s no doubt it will be painful for consumers, at least initially. The commission system has lulled many into believing advice is free because it’s paid for by backhanders between the product provider and advisers. We will have to learn that advice has a cost and it doesn’t come cheap — a full financial plan, including a complete overview of your financial affairs and a cashflow analysis (working out the amount of income you will have in retirement) could set you back £2,500 plus Vat.

However, we all accept we have to pay a sliding scale of fees for solicitors, based on their time and the complexity of the task. If financial advisers raise their professional standards — as the FSA is forcing them to do — I’m sure we will come to accept the same for this industry too.

There are flaws in the proposals, of course. While the FSA was careful to say it was not endorsing certain products such as ETFs, that was not the impression given by firms such as Ishares.

However, regulators in North America are looking closely at “leveraged” and “inverse” ETFs, which have recently been launched in Britain. The former multiply your gains from an index, while the latter make money when the underlying index falls — although there have been cases where investors have lost money even where the underlying index has moved in their favour.

If the FSA wants advisers to recommend these products, it must make sure they are being overseen properly too.

It has also done little to crack down on bank and building society advisers, who are busily selling riskier corporate-bond funds to savers earning nothing on their deposit accounts. Advice from your local branch will be known as “restricted” — in other words, it doesn’t cover the whole market — but consumer group Which? thinks the FSA should be open and call it a sale. Then consumers will realise branch staff don’t have their best interests at heart.

And watch out for advisers flogging high commission-paying products before the new rules come into force in 2012. “Advisers now have a window of opportunity to ramp up the sales of high trail-paying policies to cushion them for the years ahead,” said Ian Williams of Cavendish Online, a broker.

Insurers, which rely on commission to flog products that have little appeal without it, repeated the well-rehearsed argument that lower earners are not prepared to pay for advice upfront and will be left in the lurch by these proposals. However, there are better ways to appeal to such consumers than backhanders, such as better workplace advice. Now that the FSA has had a good stab at overhauling independent advice, it should turn its attention to branch staff to make sure low interest rates aren’t sowing the seeds of yet another mis-selling scandal.

Kathryn Cooper is editor of the Money section

Times Recommends

• How to sell your home in a downturn
• How to boost your spending power
• Unemployment benefits explained