The current Financial Services Compensation Scheme (FSCS) funding strategy is 'unsustainable' and poses a threat to both advisers and consumers, according to Tenet.
The IFA support group said the current set up could cripple adviser firms and could ultimately undermine the regulatory and compensation scheme foundations.
It added it was disappointed that after three years of planning "a better and fairer solution had not been offered", especially as many IFAs were expecting business levels to drop post-Retail Distribution Review.
Tenet said the impact of increasing costs on a reducing industry population will reach a crisis point if not addressed, which it added, was likely to be further compounded by the increase in claims management companies.
Group distribution and development director, Keith Richards, said: "Although we understand that the FSA has considered alternative funding previously, we have strongly recommended that this is revisited and have offered a potential solution through the introduction of a regulatory and compensation scheme premium.
"This would provide an additional - as opposed to an alternative - funding solution to pay for the rising FSCS and regulatory costs."
He added: "Advisers fully accept the principle of levies at a fair and sensible level and in addition bear the cost of increasing operational compliance and PII to protect clients, but the current funding strategy is unreasonable and unsustainable.
"However, a levy on the product or investment value would help moderate the current volatility and the challenge this represents to IFA businesses."
The firm made the comments in its response to the Financial Services Authority's (FSA's) CP12/16 consultation paper on future FSCS funding.
On the issue of claims management companies, Tenet has particular concerns following anecdotal evidence from advisers that even clients who consider themselves as honest can be persuaded to make unsubstantiated claims for products they are not sure they purchased, on the basis that banks cannot access past documentation or that it is easier and less costly for them to pay than to dispute a claim.
"We are calling for the FSA to conduct a more detailed study exploring the options for, and impact of, a product levy and would welcome the opportunity to work with the regulator on this," Richards (pictured) commented.
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