The review will focus on the 'advice gap' for less wealthy savers, and address barriers that deter people from seeking financial advice.
The Financial Advice Market Review also aims to "ensure the regulatory and legislative environment allows and encourages firms to innovate and grow their business models to include affordable and accessible financial advice".
The review will consider all types of retail financial products including pensions, savings, mortgages, and insurance, and will report ahead of Budget 2016.
The review will be led by HM Treasury and the FCA. An expert advisory panel comprising of industry and consumer voices will be chaired by Nick Prettejohn, Chair of Scottish Widows.
The government also announced that it intends to consult later in the year on how the current statutory arrangements for the provision of free and impartial financial guidance (including the Money Advice Service and Pension Wise) can be made more effective.
Economic Secretary to the Treasury, Harriett Baldwin, said:
"Making sure that our financial services sector supports working people at every stage of their lives is a key part of our long term plan.
"That’s why we’ve launched a major new review to explore what more can be done to make sure consumers can access high quality and affordable advice so they can make informed decisions with their hard-earned money."
Huw Evans, Director General of the Association of British Insurers, said:
"This is a welcome step which comes at a good time. The new pension freedoms have highlighted how important it is that proper advice is accessible to all, not just those that can afford it. This review will naturally take time, so in the short term we want to see steps taken to address the more immediate issues outlined in our action plan in June."
Andy Briggs, CEO of Aviva UK and Ireland Life, added:
"This review on advice is very welcome. Good advice makes a huge difference to people when they are navigating their choices on savings and retirement, but the rules today have not kept pace with people's needs. Customers should more easily be able to get low cost or free guidance from providers alongside their right to pay for more bespoke, personalised advice."
