The Financial Conduct Authority has said admitted the focus of regulators may too often be on processes rather than good consumer outcomes.
In its business plan for 2020-21, published this morning (April 7), the regulator said it saw too many firms dedicating too many resources towards redress and remediation rather than good consumer outcomes.
The FCA said it would work with the government to address this, now the UK has left the European Union - though it remains under the EU regulatory umbrella until the end of 2020.
It said a future "regulatory framework", once the UK leaves the EU regulatory system, would need to reflect what the FCA had learnt through operating in the current system.
The FCA said: "The current framework is too focused on rules and process, and not enough on principles and outcomes.
"We see far too many resources devoted to redress and remediation, and not enough to empowering consumers to take good decisions and regulatory action to prevent harm and safeguarding consumers’ financial wellbeing."
The FCA said it would "meet the challenges" of EU withdrawal, market developments and changing consumer needs.
It added: "We will need to shape our future approach to regulation to meet the needs of the unprecedented times we are operating in.
"We will not compromise on our expectations of firms, particularly that they make consumers’ interests the foundation of their business models and behave accordingly."
The FCA said it will continue with its Retail Distribution Review and Financial Advice Market Review evaluation, to make sure they were "meeting consumer needs".
Allowing consumers to make effective decisions was one of the FCA's three priorities in this area.
The FCA said: "At present we see significant risk of harm in [the pension and retail investment] markets, in part driven by the way consumers have been given additional responsibility for complex investment decisions, through the shift to defined contribution pensions and the government’s 2015 pension freedoms.
"Consumers are also exposed to significant market volatility caused by coronavirus. We want to make sure they are supported to make effective investment choices in a fair market."
To help tackle this, the FCA is proposing a consumer harm campaign to help consumers make better-informed investment decisions.
It plans to run this over five years to the tune of £2.3m, which will be allocated proportionately across all fee-blocks in the 2020/21 year.
Another priority for the FCA was making sure products were designed to meet consumers’ needs, deliver value for money, and were marketed in a fair, clear and not misleading way.
The third priority was to make sure firms had higher standards of governance, a stronger grip over networks of individuals in their distribution chains and that the regulatory system can better tackle the cost of misconduct in this market.