The Financial Conduct Authority has confirmed it is open to changing its regulation if the results of its advice market review show current rules are hampering innovation or failing to deliver the best consumer outcomes.
Last week the regulator published a call for input on the impact of the Retail Distribution Review and the Financial Advice Market Review, asking for industry feedback on the role of regulation in the market, barriers to effective competition and the affordability of advice and guidance.
The FCA asked advisers if its regulations are driving too many people to seek advice and admitted its actions may be having a "negative impact" on the market and consumers.
Speaking with Financial Adviser Nisha Arora, director of consumer and retail policy at the FCA, said the City-watchdog was open to looking at whether its regulation needed to be changed if found it was "skewing" the advice market.
She said: "We are looking at if regulation is actually facilitating the right advice for consumers, or is actually skewing, steering, or hampering innovation in any particular way.
"The call for input acknowledges regulation should be a force for good, protecting consumers and facilitating a competitive environment in the market - but at times it can get in the way and not deliver the right outcomes, and we’re open to looking at that in the review."
When asked if the FCA had seen any evidence in the market to spark concern surrounding too many people seeking advice as a result of its regulations, Ms Arora said the regulator was not approaching the review with any "preconceptions".
The concerns echo that seen in the final report of the FCA's Mortgages Market Study published in March, in which it found some consumers were being "unnecessarily" channeled into advice and a concern amongst lenders and intermediaries that they may be considered to be giving regulated advice if generic information led to a mortgage contract.
Ms Arora said: "In the Mortgages Market Study we saw and noted some of our regulation and the way it had been applied might well have steered consumers to take advice when actually it might not be needed.
"Where that’s the case, as with mortgages, we want to look at whether we need to change our regulation to encourage more innovation, ensure market competition, make sure consumers are getting a smooth journey and firms aren't being hampered by regulation."
The regulator's call for input asked respondents what barriers exist to making advice or guidance services more affordable, but advisers have since suggested that the cost of advice lies closer to home.
The rising cost of regulation and more recently the increasing price of professional indemnity insurance has raised concerns as to the affordability of the advice market, with the financial burden ultimately passed onto clients.
Ivor Harper, owner at Park Financial Ltd, said increased regulatory requirements have "beyond doubt" driven up the costs of advice.