The Association of Christian Financial Advisers (ACFA) has called for an end to the Financial Services Compensation Scheme (FSCS) in its current form and a re-drafting of the professional indemnity insurance (PII) market.
It described the FSCS compensation scheme as a "Russian roulette" for advisers and described securing PII in the current climate as "a lottery".
The ACFA is proposing that advisers' PI should be replaced by a national PI scheme to prevent underwriters "cherry-picking" the products and services they will cover, and "offering cover only in good years".
The call comes a week after adviser group Honister Capital was put into administration - leaving up to 900 advisers without a home - because it failed to secure adequate PII.
AFCA chair Derek Williams said he he felt fundamental change was urgently needed in the market.
"The news [about Honister] has been appalling," he said. "And what happens if the remaining 50% of PI insurers decide to pull out of the market?
"Many IFAs face heartache and bankruptcy over the impending Arch Cru settlements. Radical change has to be made and made immediately."
The ACFA has also made other suggestions regarding the FSCS. It said a fairer way of meeting the liquidity needs of the FSCS was required, including allowing the scheme to build up funds over time. It suggested that a percentage of all FSA fines should also go to the FSCS.
The recommendations include a universal product fee payable by the consumer as a levy on every premium, investment, and adviser charge that would go into FSCS funds.
This would be in addition to all current and proposed FSCS funding, rather than in place of it.
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