Serious Money: Take my (free) advice and avoid a haymaking IFA

Iwonder whether the Financial Services Authority had the phrase "making hay while the sun shines" in mind when it decided to ban commission for financial advisers. Because some people are starting to mutter that this is exactly what is happening right now - and it's consumers who will suffer.

Financial advisers will no longer be able to take commission from 2013. Instead, they will have to charge fees. However, most advisers are unlikely to just switch to being fee-based. One problem is that commission-based advisers (who are by no means all bad, despite being pilloried by the media) often have clients who can't afford to pay fees. Add to this the hassle of changing their business models, and the extra exams they'll have to sit to meet new qualifications, and the widespread prediction that two-thirds of financial advisers will simply quit altogether before 2013 starts to make sense.

The question is what they will do in the meantime.

Fears have surfaced that some of the less scrupulous advisers - those who gave commission a bad name in the first place - are simply going to flog as much as they can now to unsuspecting consumers before it's too late.

Andy Cowan of Towry, the financial adviser that prides itself on being anti-commission, says that very few commission-based advisers are bothering to change their business models, with most planning to sell up or exit come 2013.

"It's inevitable they will be maximising the revenue flow between now and then," he says. "All this is a really bad environment for consumers."

Towry keeps a file of products it gets sent by insurance companies (accidentally, one imagines) that it considers to be a bit dodgy. It also reports each product to the authorities with a disapproving note. One product it recently shopped to the FSA was an investment bond offered through Clydesdale Financial Advisory Services, an offshoot of Axa Sun Life, which takes 8.29 per cent off the customer upfront (though Axa said this "commission equivalent" covers other fees too and does not all go into the adviser's pocket).

Towry says that these sorts of commissions are still prevalent in the market, particularly for investment bonds. These products are offered by life insurance companies and invest across a range of funds - many of which are managed by the life insurance company.

They get stick for being poorly invested and, of course, having very high levels of commission (though the way they are taxed can be useful for some people). A lot of advisers now sell unit trusts instead, which are also pooled investments but usually have better fund managers and pay lower commission.

One commission-based adviser I know, John Blackmore of Long View, told me frankly: "The vast majority of people who buy bonds should be buying unit trusts and the answer is commission."

Investment bonds are not the only worry. Some advisers might also be putting their clients into products that will continue to pay commission after 2013. Yes - continue. It is a little publicised fact that, while new payments of commission will stop from 2013, existing ones will continue. I refer to what is known as "trail" commission, whereby a slice of your investment - usually 0.5 per cent - is taken out each year and given to your financial adviser, regardless of whether you're getting any advice.

However, some products pay trail while others do not. Nick Sketch, a private client wealth manager at Rensburg Sheppards, believes some advisers will therefore be "incentivised very heavily" to keep their clients in trail-producing products whether or not it's good for them, to avoid losing a lucrative annual sum after 2013. There is also debate over whether advisers should be required to buy cheaper institutional share classes of funds where they can (these tend to be available when buying in bulk) instead of the retail class - which pays trail.

The FSA is not unaware of this potential problem. It told me that it is monitoring commission-based advisers to check for any suspicious spikes in the number of customers being moved from one product to another for no good reason - known in the industry as "churning", as the adviser can then just pocket the commission from the new product.

However, despite the grumbling, the evidence so far is scant. The FSA says it hasn't yet found anything significant as a result of trawling through accounts. The stats department here at the Financial Times kindly took a look at some of the public accounts of commission-based financial adviser firms for me and also didn't see any "statistically significant" spikes. Sales of investment bonds at life insurance companies turned out to be largely flat in the first six months of this year - though as one adviser said to me: "The question is why they're selling more than three of these thingsa year."

No evidence would of course be a good thing. Maybe it hasn't occurred to a single commission-based financial adviser to sell as much as possible now and build up a tidy retirement pot for 2013. Maybe all the advisers warning me about it are just pessimists. I hope so.

But if you're not convinced, watch out if someone tries to sell you an investment bond.

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