Linda Woodall, the head of investment intermediaries at the Financial Services Authority (FSA), has admitted there is an "ongoing underlying tension" between advisers and the regulator, but claims this is "as it should be".
In an exclusive interview with IFAonline, Woodall said it was inevitable that some friction would exist between entrepreneurial businesses and a regulator trying to ensure consumers are treated fairly.
"There is underlying tension between the FSA and intermediaries, and there's meant to be," Woodall said. "This is as it should be.
"The tension comes from the fact that small firms are going to be entrepreneurial and fast moving. The regulator's job is to watch this and put the brakes on anything that is likely to cause consumer detriment.
"This will inevitably cause friction because we have different objectives. But this doesn't mean that there has to be out and out conflict."
Woodall's wider message was that the tone of the FSA towards the intermediaries sector has changed.
She explained that Hector Sants's now-notorious "be frightened" speech made in March 2009 should be seen within a wider context.
Sants said at the time: "There is a view that people are not frightened of the FSA. I can assure you this is a view I am determined to correct. People should be very frightened."
However, Woodall said: "The financial crisis was at its height at that time and we'd just seen the meltdown of the banking sector to some extent. Although we're not out of the woods yet, things have moved on.
"Our tone has certainly changed."
She gives a recent letter written by the new chief executive of the FSA, Martin Wheatley, to Andrew Tyrie, chairman of the Treasury Select Committee, as an example.
The letter, sent a fortnight ago, emphasised the hard work that advisers had done to meet the Retail Distribution Review (RDR) implementation deadline.
It also stated it would "be proportionate" in its future approach to supervision of intermediaries.
She added: "Through the course of RDR and before, I've met some really excellent firms who personify the kind of professional advisory firm that we'd like to see thrive."
Woodall added: "There is an emphasis on getting the communication with advisers right, we are doing this via roadshows, accessible web materials, speeches and letters, this should help them understand our message.
"However, it is about balance and there are certain practices within the industry that the FSA is currently investigating."
These practices include advised services posing as non-advised, cross subsididation, and pension transfers.
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