The City watchdog has outlined new rules for the way financial products are sold following a radical overhaul of the system.

The Financial Services Authority announced late last year that it was abolishing the current regime, known as polarisation, and replacing it with one which would give more choice to consumers.

The proposed new rules will end the restriction under which firms which are not independent financial advisors are only allowed to sell the products of one provider. Instead, they will be able to offer products from a range of companies.

Firms which now call themselves independent will be able to continue doing so, provided they offer products from across the whole market and give consumers the option to pay for advice through a fee rather than by commission.

In future, firms will also have to make it clear to consumers the scope of the advice they are offering, so they know if they are being given independent advice or being sold a product by an agent who works for a number of different providers.

The FSA also plans to look at ways of making charges for advice more transparent to make consumers more aware of how much they are paying, particularly when they pay through commission rather than a fee.