The PIA said that advisers who sell "broker funds" must inform clients that the extra fees levied may lead to the funds performing no better than than traditional funds operated by unit trust and life companies.
Advisers will also have to explain to potential investors in writing that there is a conflict of interest between independent advice and placing money in a broker fund.
The PIA's crackdown covers almost 300 advisers who manage pounds 2bn in funds on behalf of about 130,000 clients.
There are more than 1,300 broker funds covering a multitude of areas. They are set up by advisers, who use a life or unit trust company to act as the manager. The adviser creates the fund, picking and choosing between different assets.
Advisers receive payment for investment "expertise", while the fund management company is also paid to look after the portfolio, sometimes leading to investors paying more than twice the going rate.
Yet PIA researchers found that between January 1990 to November 1996 life funds grew by an average of 7.3 per cent compound each year. Equivalent broker funds grew by 6.1 per cent annually.Reuse content