A third of IFA firms could be left without PI cover, should the new Financial Services Bill fail to include a long-stop, according to figures from the Association of Independent Financial Advisers (AIFA).
The research, from the NMG IFA Census commissioned by AIFA and Zurich's ‘Fair Liability 4 Advice' campaign, found nearly half (44%) of 279 advisers polled would like Professional Indemnity Insurance (PII) run-off cover, but are unable to afford it.
A further third (30%) have been rejected for PII cover.
AIFA policy director Chris Hannant said despite falling complaints against the IFA sector, PI costs were continuing to rise.
"It is extremely positive that complaints against advisers continue to fall and shows advisers are looking after their clients. The regulator needs to recognise this in its approach to the profession.
"Advisers have responded to the demands of the RDR and the FSA needs to deliver on its promise of a regulatory dividend for firms," he said.
"Unlimited liability of advice and rising PI premiums, due to the retrospective actions of the FSA, are damaging the profession.
"It's clear PI cover is rising in cost despite the positive actions of advisers. The regulator needs to act and deliver a fairer outcome for the advice profession."
When asked how advisers dealt with the burden of open-ended liability, 37% said they would "they just live with it and accept they will take it to the grave".
"It's wrong that advisers have to accept they will take their liability with them to the grave," said Richard Howells, Zurich's intermediary sales director.
"IFAs are doing an enormous amount of work to make sure they operate better businesses. They are providing a better service to their clients, a clearer explanation on costs and ultimately a higher value in the business.
"But if that value is being eroded because they cannot even calculate their liability then it leaves the market open for predatory buyers to drive down the value of IFA businesses."
Partner Insight Video: Advisers have had to adapt to the changing investment landscape.
Investment trust savings scheme