The advice community is likely to be billed a £30m interim levy early next year, mainly covering the cost of the Catalyst Investment group failure, which was declared in default in October.
The Financial Services Compensation Scheme (FSCS) faced a shortfall of £29.5m on investment intermediation, which it will claim in the first quarter of next year it said in its latest newsletter out today.
The deficit is largely caused by the compensation payments due to clients of Catalyst, which were sold bonds worth more than £50m backed by the collapsed ARM Asset Backed Securities life settlements fund.
The FSCS said it expects to start processing individual compensation claims and making payments to eligible claimants by the end of December.
"We expect compensation costs to run into the tens of millions of pounds, but are not yet in a position to offer a more precise forecast. We expect these costs to span the 2013-14 and 2014-15 levy years," it said.
The FSCS forecasted claims of £136.5m and management expenses of £13.4m for the 2013/14 levy year. Given it has taken forward £7.6m from last year's levy and forecased recoveries of £35m alongside the £77.8m levy, this left it with a deficit of £29.5m.
The FSCS said it was also considering the potential liability of financial advisers, including Rockingham Independent Limited, who advised clients to invest in the ARM funds.
However, it said: "Whilst there may be limited circumstances in which financial advisers will be liable for investor losses, in light of the default of Catalyst, FSCS will handle investors' claims against Catalyst first."
Catalyst was censured by the Financial Conduct Authority (FCA) in the beginning of October for "recklessly misleading investors" when promoting bonds offered by ARM between November 2009 and May 2010.
The FCA said it would have imposed a £450,000 penalty had it not been for Catalyst being in default.
FSCS chief executive Mark Neale announced the interim levy last month, saying "we know this will be difficult for firms and is unwelcome news, but we have a duty to compensate investors with a valid claim."
He said the scheme would "vigorously pursue recoveries from the ARM estate where it is cost-effective to do so".
To date, advisers have paid £290.97m on top of their annual levies to fund compensation claims. Of this, almost £20m has gone on management expenses alone.
No preferred charging model
To 1,552 families and businesses
HL and Liberty SIPP slowest
Lifetime and annual allowances