Indeed, the regulatory authorities in Britain and Australia plan to ban financial advisers from receiving commission income starting in 2013.

There is a lack of transparency about how much money advisers receive in commission. Many suggest their services are free, and then receive a 'finder's fee' from the companies they recommend.

This fee is taken from the money their client invests, and is therefore often hidden from clients. The sums involved can be huge.

For example, for the type of life insurance product known as an investment-linked life assurance scheme, advisers earn the equivalent of 3 per cent of the first year's premium for every year of the policy's term.

This means that for a 25-year policy into which an investor paid HK$10,000 a month during the first year, the adviser who sold it would earn HK$90,000 in an upfront commission.

To test how independent the financial advice available in Hong Kong is, Money Post carried out a mystery shopping exercise with three commission-based financial advisers. After an initial interview, Money Post re-contacted each financial planner, giving them the opportunity to explain why they offered the advice they did.

The scenario

Money Post devised the following scenario involving a family who had recently relocated to Hong Kong from Britain.

When approaching the advisers, we said both adults had several years' contributions in defined-benefit pension schemes, but were unsure what to do with these schemes now they were in Hong Kong. We said the family had no savings or investments, but had a mortgaged house in Britain.

We said both adults had life insurance to pay off the mortgage if either died, while the husband, who was the main breadwinner, had life insurance through his employer.

The family had outpatient medical insurance through the husband's employer. They had about HK$10,000 to HK$20,000 spare to invest each month, but were risk averse. Finally, we told the advisers that the family in question was not sure how long they would stay in Hong Kong and may return to Britain in five years.

Any discussion of a British expat family's financial planning quickly delves into the murky realm of Qualifying Recognised Overseas Pension Schemes (Qrops). These schemes enable expats with British pensions to transfer the money they have built up in Britain overseas without incurring a penalty.

There a tax benefits to such a move but there are also risks. A person may be giving up a defined-benefit pension, in which case the holder will be giving up benefits guaranteed by their old employer.

And the Qrops schemes are not cheap. According to one industry insider, the commission advisers earn for setting up one of the schemes can be high as 7 per cent. This is the equivalent of HK$127,000 on a pension scheme valued at HK$1.8 million, and the money is taken directly out of the individual's pension. No wonder then, that two of the advisers identified below were quick to recommend Qrops.

These issues are specific to British expats. But advisers' enthusiasm for high-commission structures has implications for anyone seeking their help, regardless of nationality. The jargon changes, but the agendas of less scrupulous advisers remain the same: to extract a maximum of commission income.

Because much of what we have to write here is critical, we chose not to identify the individuals we spoke to, or their companies. They are all active in Hong Kong.

Adviser A

Adviser A recommended the family set aside three to six months' income for emergencies. He said the parents were both under-pensioned, and they should consider converting their defined-benefit schemes into a Qrops. He said this would give the family more choice over where they invest. It would also mean a surviving spouse would have more control over the money if the other partner died.

He advised that the pensions may not be safe in Britain, given the general financial turmoil.

He recommended the family buy an investment-linked life assurance scheme. He explained it was easier to increase contributions to this product than to decrease them, so suggested the family not commit more than half of their spare money to the product until they have built up an emergency cash fund.

The verdict

Adviser A looked thoroughly at the family's financial situation, and his recommendation that they build an emergency cash fund was a good one. But he failed to make clear that, by transferring money out of defined-benefit pensions into a Qrops, the family would be giving up pensions that provide 'guaranteed' benefits, and would instead be shouldering the risk of investment volatility themselves.

His assertion the pensions may not be safe in Britain also failed to take into account that they are either government schemes or backed by Britain's Pension Protection Fund.

He was diligent in explaining that the family could not decrease its contributions to the investment-linked life assurance scheme during the term of the plan. But his description of the product still left the mystery shopper with questions and his explanation of the charges was unclear.

A spokesman for Adviser A said: 'Based on the information provided by the client, the adviser, quite correctly, suggested several options to investigate. However, he didn't commit to any established recommendations as the mystery shopper's situation still required further clarification.'

Adviser B

Adviser B recommended the family not touch the defined-benefit pensions they have in Britain. He said: 'Defined-benefit pensions are rarer than hen's teeth. Don't touch those at all.'

With defined-benefit pensions, an employer pledges to pay a set retirement income. Unlike other types of pension, the employer and not the individual bears all of the risk of increased life expectancy and investment volatility. In Britain, the press often calls these gold-plated schemes, and most have been closed to new members as they are so expensive for companies to offer.

He advised the family to not invest any money until they have set aside the cash equivalent of four to six months' salary. Once the family has done this, he said it should put money into a unit trust-based investment. He also advised that the family check how much life insurance they would get from the husband's employer to make sure it is adequate.

The verdict

Adviser B conducted an excellent fact-finding prior to giving advice, including asking whether the family had a will. The advice that the family should not move the pensions and not consider investing until they had built up a cash emergency fund was sound. It is also to his credit that nothing he recommended at the initial meeting would yield him any commission.

Adviser C

Adviser C recommended the family take out more medical insurance that provides both inpatient and outpatient coverage, as the family's current cover is likely to have limits. The sample policy he showed cost US$8,300 for the whole family for a year and included US medical cover. He said the family should take out more life insurance, as their current coverage is only in place while the husband works for his current employer.

He advised the wife to also get life insurance, even though she is not the main breadwinner.

He advised the husband to get insurance for critical illness. Finally, he advised the parents to move their pensions into a Qrops.

The verdict

Adviser C's recommendation to take out a Qrops was made before he had gathered details on the existing pensions. In fact, it was made within seconds of him establishing the family had pensions in Britain.

He suggested that the pensions were not safe left where they were, reeling off a list of British companies that were in deficit, but he did not ask if the pensions in question were backed by the government.

His advice to move the family's existing pensions into a Qrops scheme contradicted the counsel of Adviser B, who rightly said defined-benefit plans should be left alone.

When asked if Qrops were expensive to set up, Adviser C was very evasive. He said that if the family left the money where it was, it would be taxed at 55 per cent if both parents died.

The medical insurance policy he suggested duplicated the inpatient cover the family already had and was unnecessarily expensive, as it included treatment in the US, which the family did not need.

The fact find he carried out was minimal, and he was not good at answering questions.

The mystery shopper also felt he used statistics, such as quoting cancer rates, to scare her into buying insurance that was far in excess of requirements.

What to do?

When consulting a financial planner, there is a standard set of questions that a person should ask. (See sidebar).

Otherwise, a client should be attuned to how an adviser earns his money. If money is earned through commissions from investment products sold, there is a potential conflict of interest.

Ipac, an Australia-based financial advisory firm with offices in Hong Kong, charges clients an upfront fee to draw up a financial plan.

It still keeps any commission that is generated through the sale of insurance or investment products, but customers are given 'detailed information about the actual commission and other benefits' their adviser receives.

For our mystery shopping exercise, we visited Sheila Dickinson, who is senior vice-president of the group in Hong Kong and has worked in the financial services industry in Britain and Hong Kong for more than 30 years.

The initial meeting, which included a thorough fact find, was free. It would then have cost the family HK$12,500 for Dickinson to go away and draw up a detailed financial plan.

While the fee sounds high, it is transparent, and goes some way to assuring consumers their adviser is working for them.