Rory Percival from the Investment Intermediaries department of the Financial Services Authority has warned that firms should check the language used by their firms and their chosen DFM.
Mr Percival was speaking on regulatory considerations for DFM-outsourcing as part of Defaqto's DFM conference, held at the Business Design Centre in London today.
Mr Percival said there was the possibility for conflicting definitions between the two parties which could mean a potential for systemic mis-selling.
He said: "We are very bad in the industry for using jargon and we have several definitions for the same thing. Do the two firms speak the same way?
"We don't want to see an intermediary firm describe a client as cautious then tell the DFM that if they two definitions don't match up."
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He gave the example of a firm describing a client as cautious and then the DFM invested in cautious managed funds.
He also said the RDR had meant firms should now be recognised as "professional service firms" and that this is how the FSA would be judging them when it supervised firms.
Once the Financial Conduct Authority is brought in on 1 April 2013, Mr Percival said the regulator would be operating a much more judgement-based style.
Mr Percival said: "My favourite rule in the handbook is that which states you should 'act honestly and professionally in the best interest of your clients'. Professionalism will be core in how you will now be assessed by the FSA."

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