Chief executive Mike O’Connor welcomed the FCA’s consumer focus but said inappropriate products should be stamped out before consumers are affected.

“The FCA promises it will be more concerned about protecting consumers, especially those in vulnerable positions, than protecting firms. This is as a very positive step forward.

“But the test of the FCA will be whether it prevents toxic products such as PPI, mortgage endowments or split capital trusts in the future. Will it intervene early or will pressure from industry delay action?”

He added: “A model where customers are ripped off, and then awarded compensation years afterwards, is expensive and wasteful and serves consumers badly.”

Consumer Focus also backed the FCA’s move to look across the market, rather than just focusing on individual firms.

Other reaction to the FCA paper:

Association of British Insurers (ABI) director of financial conduct regulation Maggie Craig said: “The FCA’s approach to regulation must be about improving consumer outcomes. Its report rightly recognises the importance of promoting competition in the interest of consumers, and better understanding their needs, as well as the firms and markets it will regulate.

“The report builds on insurers’ work to embed the principles of Treating Customers Fairly and we look forward to working in partnership with the regulator to take this further.

“Regulation must not be developed in isolation from public policy objectives. It is vital that the FCA’s work supports wider initiatives, such as getting an ageing population saving for retirement, reforming long term care funding and improving consumer access to financial products that meet their needs.”

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Investment Management Association (IMA) director of wholesale Guy Sears said: “The Journey document is very encouraging, rightly focusing on outcomes for investors. We appreciate the commitment to greater engagement and more developed interaction with both the industry and consumers.

“The real test will come in retaining and developing a high calibre workforce to effectively fulfil these objectives.”

David Thomson, director of policy and public affairs at the Chartered Insurance Institute (CII) said: “There is no doubt that the new FCA will be a tough, pre-emptive and interventionist regulator.

“The challenge will be for the FCA to regulate in a way that promotes and produces better outcomes for the public rather than just increasing the complexity of regulation for the industry. We welcome the new regulator’s emphasis on placing culture and behaviour at the heart of the new regulatory approach.

“The CII has been calling for some time for the regulatory system to take greater account of the behaviour of firms as well as individuals. We look forward to seeing how the FCA will not only identify and punish poor and unethical behaviour but also encourage firms’ intentions to go beyond mere compliance with initiatives like the CII’s Corporate Chartered title and Aldermanbury Declaration initiatives, which aspire to promote higher standards to the public.

“But the proof will be in how this is exercised, and whether the ends for the public will justify what may appear to some as draconian means. The FCA must develop its approach flexibly to take into account other sectors than banking – and have a proper risk-based approach based on measures that reflect the public interest.”