The regulator found the percentage of affiliated funds on buy lists is on average 3.8 times larger than the percentage of non affiliated funds.
Affiliated funds were also less likely to be removed from buy lists.
Companies which provide both recommended fund lists and the platforms on which the investments are held, were keen to distance themselves from any suggestion that investors suffer under a conflict of interest.
Danny Cox, head of communications at Hargreaves Lansdown, which runs the Wealth 150+ list of favoured funds, highlighted another part of the FCA report which found recommended funds exhibit significantly better past performance than the non-recommended funds.
This was found to be the case both before and after the recommendation was made. Funds on best buy lists were also found by the FCA to be cheaper for the client in fee terms, Mr Cox pointed out.
He added that while the report showed a considerably higher number of affiliated funds than non-affiliated funds make it onto buy lists, this does not apply to Hargreaves Wealth 150+ list.
Jason Hollands, managing director of business development at Tilney Bestinvest, which has its own list of top rated funds, said clients can and do buy the company's own multi-asset funds, "which reflect the best ideas of the fund research team", but these are neither star rated nor included in its lists of top rated funds.
But Rory Maguire, chief executive at Fundhouse, which provide fund research and ratings to financial advisers and institutions, said the FCA report showed buy lists are "not biased towards the interests of the customer", as they should be.
Best buy lists, while considered by many financial advisers as part of their research, are more heavily relied on by direct investors looking for guidance about where to put their money without paying for professional advice.
James Pigott, managing director of independent advice firm Pigotts Investments in Dorking, Surrey, said he looks at the buy lists of all firms, but does not follow them blindly when choosing funds for his clients as he does his own research.
Graham Bentley, who has worked at some of the biggest names in fund management including M&G and Old Mutual Wealth, and who now runs a consultancy business, said he feels the regulator is looking at the “the wrong target” in best buy lists.
The regulator should instead examine the relationship between research firms who charge the fund provider a fee to allow the latter use a logo from the research company to appear on fund factsheets.