Income-based capital adequacy rules proposed by the FCA will hit medium-sized advice firms hardest, Apfa warns.
The trade body says some firms will have to hold up to 10 times as much capital under the new rules.
In May the FCA proposed requiring firms to hold 5 per cent of the annual investment business income earned in the previous year from 30 June 2016.
The minimum capital resources requirement will increase from £10,000 currently to 15,000 on 30 June 2016, and £20,000 on 31 July 2017.
Currently firms with up to 25 advisers pay the minimum. Those with more than 25 advisers must hold four weeks’ expenditure, or 13 weeks’ expenditure for networks.
Apfa argues that firms with 10 to 25 advisers which currently pay the minimum will see their capital requirements increase dramatically from next year.
It says a firm with an income of £2m would see its requirement jump from £10,000 to £100,000.
Apfa says in its consultation response that the requirements should be staged for these firms as well as those paying the minimum.
The trade body proposes a level of 3 per cent of income by 30 June 2015, rising to 5 per cent by 31 July 2017.
Apfa director general Chris Hannant says: “Overall, we feel the proposals are sensible. But mid-sized firms will feel the biggest increase and it does not seem right that those with the furthest to go are only given a year to get there.”