Commission-hungry IFAs are accused of failing to offer the best deals to savers and investors.

Can you trust your adviser? 

CAN YOU trust a so-called independent financial adviser? The truth is, probably not! 

Unless you are prepared to pay a fee for the service – instead of allowing the adviser to take commission from your investments – there is every chance you will not be told of the best deals available. 

Investors can save hundreds, even thousands, of pounds by choosing a fee-based adviser. Not only does the fee often work out cheaper than commission payments, but you should also reap the benefit of a better savings account, investment fund or pension plan. 

Evidence has emerged that appears to confirm the suspicion that independent financial advisers (IFAs) are not truly independent – worse  it suggests a corrupt system. 

In theory, IFAs are supposed to trawl the entire market to find the best deal for clients but in practice many sell products only from a small range of "panel" companies. The restricted choice effectively turns them into tied agents for a selected group of firms - usually those that pay the most commission. Companies such as Virgin Direct and Direct Line rarely appear on IFA panels. Although they offer low-cost pension plans and tracker funds, they do not pay fat commissions to advisers. 

Gordon Maw of Virgin Direct says: "Less than 5% of our business comes from IFAs – and most of that is from fee-based advisers. Direct companies such as Virgin and Direct Line offer some of the most competitive pensions and investments, but we do not get a look in simply because we don't pay commission." 

Bradford & Bingley (B&B) is proud of its status as the only bank or building society with an IFA division. But critics argue that it should not be able to call itself independent because it sells pensions, insurance and savings schemes from a limited panel of companies. 

B&B's panel is so restricted that it breaks the rules imposed by the Financial Services Authority (FSA), the City regulator. The FSA demands that IFAs have at least 10 companies on each panel - B&B has only five. It has a "lead" product on each panel, which it always recommends first. If you want an easy-access cash ISA, for example, it recommends its own account, even though it pays 5.5% compared with Nationwide's 6.5%. 

B&B's lead pension company is CGU. A senior adviser justified the choice of CGU to a reporter on a mystery shopping exercise because it had been able to "negotiate a special deal for consumers". But CGU's personal pension is no better than average – and you can certainly buy a cheaper plan. 

We asked Chamberlain de Broe, a fee-only IFA, to recommend pensions and savings schemes to our reporter who said he could afford to pay £80 a month into a personal pension scheme, £100 a month into a low-risk savings plan and £75 a month into a medium-risk plan. The company came up with a completely different list that would save about £1,500. 

James Higgins of Chamberlain de Broe says: "Some of the recommendations from B&B, particularly the 10-year savings plan, suggest it is more concerned with its own income than suitability for the client." 

But is any panel, even if it is made up of the minimum 10 companies, big enough to allow advisers to call themselves independent? Most critics think not. Chamberlain de Broe believes it is impossible to give truly independent advice if you operate from a panel. Higgins says: "Panels take no account of the details of a client's requirements or portfolio. No one panel company can claim to be able to offer a suitable product for everybody." 

Graham Bates of Bates Investment Services, a specialist IFA, has 70 companies on his unit-trust panel alone. He says: "If an IFA does their job properly, they have to start by trawling the whole market." 

With companies keen to get on the panels to secure a steady stream of business – and IFAs wanting to earn as much commission as possible – the result is an unhealthy conflict of interest. 

Maw previously worked for Norwich Union and says he was often threatened with removal from an IFA panel because its commission was "not competitive". He says: "IFAs look at the commission first and the merits of the products afterwards. It is nonsense that they trawl the whole market – they simply trawl through the companies that pay the highest commission." 

Bradford & Bingley says it is unaware of the requirement to use 10 companies on its panels. It also denies it is biased towards commission. A spokesman says: "We outsource the research to an independent company who recommends the best deals which we then place on our panels. Commission does not come into it." 

Despite the apparent breaches of its rules, the FSA refuses to launch an investigation into the system. 

How the cost of advice compares

Bradford & Bingley recommendations

•	Pension: £80 a month into CGU
•	Savings: £75 a month into Bradford & Bingley cash ISA, paying 5.5%
•	Investments: £5,000 into either Legal & General distribution bond, paying 6% or Prudential Distribution bond, paying 5.5%. £75 a month into Standard Life 10-year Maximum Investment Plan 
•	Total commission to adviser: £1,520

Chamberlain de Broe recommendations

•	Pension: £80 a month into Legal & General stakeholder pension 
•	Savings: £75 a month into Nationwide cash ISA, paying 6.5%
•	Investments: £75 a month into Jupiter Income ISA. £2,500 into BFS Income & Growth preference shares. £2,500 into Edinburgh UK Index Tracking fund
•	Total commission to adviser: £127 but the commission is rebated to client or invested in the funds
•	Fee to adviser: £120 to £240