More than three quarters (87 per cent) of IFAs say the Financial Services Compensation Scheme has a huge or significant impact on their financial vulnerability and chances of survival.
According to a survey by Panacea Adviser, advisers have been feeling vulnerable themselves amid the cost of living crisis.
The survey found only 6 per cent of advisers said that current company morale was positive with 35 per cent seeing morale as negative or very negative.
Just under half (42 per cent) said they had seen a significant impact to their business as a result of energy increases.
The survey by Panacea Adviser had received 164 anonymous responses at the time of publication.
Derek Bradley founder and chief executive of Panacea Adviser, said the City watchdog “should be very worried for the wellbeing of smaller IFA firms”.
Elsewhere, the survey also revealed that not one single person believes that FCA fee consultations are genuine, stating it is just a box ticking exercise to lead to a pre-determined outcome.
Bradley added: "For most FCA consultations they have already made up their minds before consultation even takes place.
"There are some excellent people at the FCA but it seems that at the top the leadership is very out of touch with reality.”
Last month, FTAdviser spoke to a number of directly authorised IFAs who questioned the regulatory approach to vulnerability, claiming they themselves are under growing pressure and stress from the Financial Conduct Authority.
At the time, one adviser, Richard Bishop, managing director at PFEP Wealth Management, took to Twitter to say he gets “zero support” as a directly authorised adviser, arguing that many advisers are vulnerable right now.
Bishop said:"“The FCA is not taking into account that small IFAs, (especially single adviser firms of which there are many) are subject to all the drivers of vulnerability the firm's clients may suffer from.”
An FSCS spokesperson said: "FSCS shares the concerns of the financial services sector about high compensation costs, and is very conscious of the impact on levy payers.
"We have just published our first forecast for the 2023/24 levy, to help firms prepare for the year ahead, and we make recoveries wherever possible to help reduce the amount we need to charge to firms. Currently, we expect next year’s levy to be around 20 per cent lower than this year.
They added: "There is no single answer to the harm which sits behind the compensation FSCS pays. We need solutions that drive simplicity rather than complexity for consumers, address bad practices, such as mis-selling, and create more financial resilience in firms.
"We are committed to being a thoughtful voice in this debate, providing insights and an independent view on the issues.”
The FCA has been approached for comment.
The survey remains open for any advisers wishing to respond.
sonia.rach@ft.com
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