A discussion document about to be drawn up by the Personal Investment Authority will discuss the merits of scrapping the existing system, called polarisation.
At present, advisers must choose between selling the products of only one company or from the entire range within the market.
Changing the rules would mean that advisers would legally become agents of the companies whose products they sell instead of being responsible to their clients.
In return for abandoning polarisation, it is being suggested that insurance companies might shoulder their tied agents' share of the pounds 3bn pension transfer compensation bill, likely to drive hundreds of advisers out of business.
However, Brian Denny, chairman of the IFA Association, the trade body for advisers, yesterday attacked the proposed "multi-tie" system as being harmful to the consumer, who would be unable to tell whether the advice being given was truly independent.
"It is of paramount importance to the consumer that the lines between independence and tied agents are not blurred," Mr Denny said. "Commercial interest of certain product providers must not be allowed to take precedence over consumer interests and we vehemently oppose multi-ties."
Polarisation, in place within the financial services industry since 1988, has been the corner-stone of the present regulatory system. It has given IFAs the chance to promote themselves as totally unbiased in the advice they give clients.
However, consumer groups have regularly attacked this notion as a sham, claiming that advisers are often motivated by commission rather than their clients' interests.
Many advisers operate on the basis of product "panels" whereby they will only recommend the product of a com- pany if it is on the list. This is defended as the result of careful research into the relative merits of different products.
An insurance company executive, who refused to be named, said advisers were bound to hate the idea.
"But they should consider whether they want to be driven out of the industry because of pension compensation. Also, they should ask themselves honestly exactly how many companies they now recommend the products of," he said.Reuse content