The Investment Management Association (IMA) said it is "very disappointed" with elements of the FSA's guidance on the treatment of trail commission post-RDR.
The FSA today set out where trail commission can continue to be paid to advisers from 1 January next year, when all other forms of commission will be banned.
It said trail can still be payable on fund switches within life policies set up pre-RDR, but not on other products, and not on direct holdings in funds.
The IMA said this could create an unlevel playing field.
Julie Patterson, IMA director of authorised funds and tax, said: "We are very disappointed that the new guidance expressly allows investments underlying a life product to change and not be subject to the new RDR rules, even where new advice has been given.
"This will lead to distortions in the marketplace, about which we have consistently raised concerns."
The FSA said the reason it is permitting trail on fund switches in life contracts, but not on others, is a legal one.
"The fact the fund switch doesn't alter the product wrapper means that trail could continue," said head of investment policy Peter Smith (pictured).
"With an ISA, for example, there isn't a product in the same way there is an insurance contract, so there is a substantive difference between the two."
Insurer Prudential welcomed the development.
Russell Warwick, distribution change director, said: "This is a sensible decision which reflects the core basis of a typical insurance product in having different investment options available to meet the changing needs of customers without the need to replace the tax wrapper, and therefore lose valuable taxation benefits linked to the original product."
'People miscalculate how much they need'
Information request by AJ Bell
Could lose 97% of investment
'Document your conversations'