Leading financial regulator Martin Wheatley says approaches that assume consumers can make bad decisions are becoming as important as those that leave consumers to exercise their own judgement.But, he says, neither approach is likely to be strong enough to form the foundation for effective future regulation.Wheatley made his statements after delivering the Australian Centre for Financial Studies' fifth International Distinguished Lecture.Wheatley, currently the chief executive officer of Hong Kong's Securities and Futures Commission, will take over the UK's Financial Conduct Authority (FCA) next month. The FCA is one of the two successor regulatory bodies being formed from the splitting of the UK's Financial Services Authority.The approach that assumes consumers can make bad decisions is the foundation of what is now called "behavioural finance". Its recent rise has matched the fall in popularity of the "efficient markets hypothesis", which says informed consumers can best exercise their own judgement.Answering questions after his lecture, Wheatley agreed that behavioural finance had replaced the efficient market hypothesis. But, he later clarified his remarks, saying behavioural finance was matching the importance of the more market-trusting approach. Neither approach was enough on its own, he said.Hong Kong had retained a "buyer beware" regulatory philosophy, Wheatley said. Its system presumed that informed consumers would make rational decisions. In his lecture, he warned that such systems had to confront consumers who wanted high returns but were unwilling to read documentation related to the financial products they were buying. (Wheatley has experienced the results of such a system close-up: he was the target of consumer protests during the resolution of Hong Kong's "mini-bond scandal".) Products themselves were often more complex than the average person could understand, Wheatley added.The UK is moving to the other end of the spectrum, giving regulators the power to prevent the sale of products they view as unsuitable. The UK system would produce "difficult calls", he warned, because most products simply reflected different bundles of risks and returns.Wheatley also warned that ill-considered short-term regulation would continue to result in perverse consequences. As examples he cited short-selling bans, which have frozen up parts of the financial system, and bans on bankers' bonuses, which have pushed up bankers' ordinary pay."There's a significant issue about regulatory change made in a hurry, and made under political influence," he said.