The Financial Services Authority has taken a step back from its plan to stigmatise non-independent financial advisers as "salesmen", but its final proposals for rooting out commission bias from the sales industry were broadly welcomed yesterday.

Banks and other providers selling a narrow range of products will be able to call their service "sales advice", as opposed to independent advice, in the final draft of the FSA's retail distribution review. There will also be connections built in to the new money guidance service being trialled by the government following the Thoresen Review this year.

The two main planks of the reform are upgraded minimum qualifications for all advisers, overseen by a professional standards body, and the clear agreement of remuneration upfront with the customer, in what will be called "adviser charging".

The FSA said its proposals came "at a time when consumers need real help and advice with their retirement and savings planning", and were designed to rebuild confidence and trust in the industry.

Banks and tied product sellers such as HBOS-owned St James Place had campaigned hard against the interim proposal banning them from giving "advice", arguing that it would "disrupt customer relationships" and deny advice to the less affluent, but the regulator ran into intractable European legal issues on the definition of advice.

Insurers too, including Otto Thoresen's Aegon UK, had argued that the radical split would make financial advice "exclusive".

Yesterday one of the major campaigners against provider commission, leading adviser Towry Law, welcomed the proposals.

Andrew Fisher, chief executive, said they "lay the foundations for a radical improvement to the consumer experience", with the raising of professional standards and "the practice of independent advisers being paid by product providers abolished". Fisher said: "For the first time, the cost of commission-based advice will be explicit and be clearly deducted from clients' investments."

But smaller IFAs were less happy. Chris Cummings, director-general of the Association of Independent Financial Advisers, said the FSA had been "put under pressure from others in the industry to change the proposals".

He said: "Small firms feel let down and trampled on. Yet again the bar for IFAs has been pushed up far higher than for anyone else."

He also hit out at the FSA's requirement for firms to double their capital base "at a time when IFA firms, like other small businesses, are struggling to cope with the economic turbulence".

The Association of British Insurers said the FSA had heeded its calls for increased professionalism, and for the adviser charging system.

However, the Financial Services Consumer Panel cautioned: "If it is right that independent advisers should not be remunerated by commission, can that also apply to non-independent advisers?"

It also urged the same standard of qualifications for providers of tied products, warning: "Some believe that a successful business model can be built on the basis of such a qualified workforce. Others don't."

The Investment Management Association had similar reservations. It said: "We remain concerned whether consumers will understand the concept of sales advice. It is important that any new standards or restrictions be embedded in rules, that those rules be applicable to all sectors, and that they apply appropriately to firms that are providers or distributors, or both."

The Securities and Investment Institute said the report marked "a step-change for the retail financial and securities industry", by seeking to raise significantly standards in both the education and behaviour of financial advisers.

Scott Dobbie, chairman of the institute and also of Edinburgh Investment Trust, said: "We welcome the creation of the Independent Professional Standards Board and look forward to working with them."

Jon Pain, FSA managing director of retail markets, said: "The RDR proposals provide a golden opportunity to regain consumer confidence and trust in the financial services industry."

The FSA will continue consultation during the first half of next year with the intention that all firms will have implemented the changes by the end of 2012.