The Financial Services Authority (FSA) carried out 231 mystery shops at six major firms between March and September last year in order to discover the quality of advice given to customers looking to invest a lump sum.
Three-quarters of customers received good advice but in 15% of cases the adviser did not gather enough information to make sure advice was suitable. In 11% of occasions the advice was not appropriate.
Santander confirmed it was one of those tested and said in December it took 800 investment advisers "off the road" for re-training. A bank spokesman said the move was prompted by the FSA's probe as well as industry-wide changes to the way customers pay for advice.
In the wake of recent scandals, the FSA said all firms should consider whether their incentive schemes increase the danger of people being mis-sold products which are unsuitable or too risky and put controls in place to prevent this.
The study found examples of advisers failing to recommend that customers should pay off their debts when this would have been the right option.
In one in 20 mystery shops they also failed to properly take into account the length of time a customer wanted to hold on to an investment for.
In some of the mystery shops, advisers gathered the information necessary to be able to determine what would have been suitable for the customer but still recommended an unsuitable product.
The report said: "We expect all firms to consider whether their incentive schemes increase the risk of mis-selling and to put in place adequate governance and controls to prevent this.
"We will carry out a review later in 2013 to see whether firms have acted on our guidance."
It said one adviser at an unnamed firm found a customer had around £9000 of credit card debt and was only making minimum repayments.
The adviser failed to recommend the customer repay his debt and instead recommended an investment which was not in his best interests.
A spokeswoman for the FSA said the mystery shopper exercise had led to enforcement action being taken against one firm, and it will be working with others which were found to be giving poor advice on ways they can improve their services.
Clive Adamson, director of supervision at the FSA, said: "Customers are not consistently getting the quality of advice on their investments that they should expect.
"While we are disappointed by the results of this review, we are encouraged by the action the firms involved have taken to rectify the situation for their customers."