Britain’s Financial Services Authority (FSA) this week added ink to its previously pencilled plans to reform financial services for the benefit of UK consumers.

The primary notion of the Retail Distribution Review (RDR) is to reduce the dependence of financial advisers on product commissions as their primary source of remuneration.

Commission, the FSA argues, distorts advice and acts against the interests of consumers.

While this view is laudable, some warn that the RDR will lead to a fall in independent adviser numbers.

Another fear is that the RDR is a plot to give the banks greater freedom to sell a limited range of pension and investment products through a quasi-advice process.

But in its latest consultation paper, the FSA has reaffirmed it still has the issue of commission bias in its sights and is sticking to its view that to be considered independent, advisers must consider products from all of the market and agree their charges with their customers, rather than rely on provider commissions.

If these conditions are not met, the resulting transaction will be classed as ‘restricted advice’.

A u-turn at this stage would have been a major shock, but some pundits had warned that the recession could derail the RDR, as the need to sell product would overcome a high-minded impulse for reform.

And to support this view, CoreData has heard of advisers, under the pressure of the economic downturn, now selling those products giving the most commission to shore up their cash flow.

But most observers are generally supportive of the FSA’s overall direction, with a few quibbles.

Some point out practical problems, while others bemoan the delay until 2012 when the reforms are implemented.

But the real issue is that consumers will not understand the subtleties of the new regime.

To most purchasers, anyone giving more than the most cursory information on a pension or mutual fund is giving advice, whatever the provider, adviser or regulator defines their input as.

Creating different types of independent and restricted advice could simply create confusion in the minds of the average customer.

In the music business, there used to be the old grey whistle test – could a senior citizen whistle a song after hearing it for the first time?

If they could, the song would probably be a hit.

In an ideal world, the FSA should find a way to legislate for a similar test in retail financial services.

Advisers and providers should be held to a test of ‘would I be happy for my elderly parents to buy this, or be given this advice?’

If the RDR can do this, it will succeed.

The danger is that too much wiggle room will allow the less scrupulous to find ways to continue to distribute products that are either manifestly unsuitable, or which are chosen chiefly for the commission they offer.