The vast majority of regulated firms lack faith in the Financial Conduct Authority's (FCA) ability to promote competition in the sector, a key tenet of the new regulator's mandate.
According to research compiled by the Financial Services Practitioner Panel (FSPP), just 28% of relationship managed firms - those which have dedicated contact points with the regulator, usually larger firms - were confident of the FCA's ability to deliver on promoting effective competition.
Promoting competition in financial services is one of the new objectives adopted by the regulator when it took over from the Financial Services Authority (FSA) in April.
The FSPP believes firms' lack of confidence in the regulator's ability to improve competition stems from the tone of the initial information provided by the FCA and firms' previous experience with the FSA.
The FSPP said it believes it is "critical" that the FCA works to put in place a clear action plan on how it will tackle its competition objective, and promote that in the wider community and within the regulator itself.
"The attitude towards fostering effective competition must be imbued throughout the regulator. Failure to support competition is likely to lead to less choice in the market, and ultimately could undermine the regulator's ability to deliver on its consumer protection objective," its report said.
Firms were much more confident about the regulator's ability to secure an appropriate degree of consumer protection, with 70% of relationship managed firms believing that the FCA will deliver on that aspect of regulation.
Elsewhere the survey suggests the regulator has so far failed to communicate its aims and objectives to smaller firms.
Larger firms that are relationship managed have a far better understanding of the FCA, its objectives and plans than those that are not, with 84% of relationship managed firms and 42% of non-relationship managed firms reporting that they knew about the FCA's objectives.
Non relationship managed firms use the media (57%), FSA and FCA websites (46%) and FSA and FCA newsletters (45%) as their main information sources about regulatory requirements.
Wholesale firms are also generally more satisfied with the level and effectiveness of regulation than retail firms.
"The FCA must put more effort into communicating with smaller firms and
offering them some means of engagement and building up their
understanding of the regulator," the report stated.
When asked how the FCA can be made more effective than the FSA, the
majority of all types of firm asked for clearer regulation from the FCA - 80% of firms said this was very important.
This is followed by 65% saying more staff with industry experience is very important, and 63% saying FCA staff being more willing to give opinions is very important.
On the Retail Distribution Review (RDR), the report suggests there is a strong underlying belief that ultimately RDR does not benefit consumers as a large proportion of the population is now excluded from receiving advice.
A key criticism was that the implementation ‘on the ground' has been poor and firms feel that there has been a lack of practical assistance and guidance from the regulator.
Additionally, smaller firms feel overburdened with regulation and that from a cost, or fees, point of view believe they have been treated unfairly compared with the larger firms.
IFAs and general insurance intermediaries - who make up the bulk of
the smaller non-relationship managed retail firms - say that they were
not personally involved in the mis-selling scandals that have cost the
industry so much money. Yet they have picked up additional costs.
Moreover, they feel that the fees they had to pay to the FSA were not in
proportion to those paid by larger firms and were not correlated with risk.
However the report suggests there has been a recovery in firms' satisfaction with the regulator from the dip following the financial crisis and subsequent regulation.