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Last Updated: Wednesday, 27 June 2007, 11:39 GMT 12:39 UK
Advisers' commissions under fire
A man writes a cheque
The FSA wants everyone to understand their financial options
Financial advisers could be barred from calling themselves "independent" if they earn commission from financial products, the City watchdog has said.

A Financial Services Authority (FSA) review found that commission based sales could lead to "consumer detriment", shorthand for mis-selling.

The FSA added it wanted a "more cost effective" way of making financial advice available to the public.

The financial advice industry has until the end of 2007 to respond to the FSA.

The FSA is expected to issue its final guidance on the matter early in 2008.

Criticism

Consumer groups have often criticised financial advisers for putting their own interest over their clients in a bid to earn commission from product providers or meet sales targets.

"There is an inherent conflict of interests in commission-based advice which can result in people being sold financial products that aren't necessarily right for them," Peter Vickery Smith, chief executive of consumer group Which? said.

The FSA report seemed to bear out some of this criticism.

The FSA report said: "Product providers often remunerate advisers, and there can be a mis-alignment of advisers' interest and those of consumers, adding to the risks of consumer detriment."

In response, David Elms, chief executive of Independent Financial Advice Promotion (IFAP) said he welcomed the FSA report and that greater transparency and ensuring "there is no conflict of interest between the consumer and the adviser" was desirable.


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