Speaking at a roundtable hosted by the insurer, Simon Bradley said the next 12 to 18 months will be a “period of shrinkage” for the IFA market, as some advisers leave ahead of the RDR rule change at the end of 2012.

But he predicts the advice sector will start to grow again “around 2013” as a new wave of IFAs enter the market from recently set-up university and training courses.

Experienced advisers were warned they must be transitioning to the consumer agreed renumeration (CAR) business model now, if they want to stay in the market.

Personal Finance Society (PFS) CEO Fay Goddard said firms who have not started changing their model face a “tight time-scale” with just two years to go before the deadline.

“It takes three to five years on average to go from commission to fee charging. Two years will be a tight time-scale.”

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She said of 5,000 firms surveyed by the PFS, 56% said they are “almost there” on charging while 34% “still have a way to go” and 10% have yet to start.

“The problem with adviser charging is in advisers’ heads not with clients refusing to pay fees,” she said.

The panel said advisers need to stop being “embarrassed” by selling themselves for a fee.

AIFA director Robert Sinclair said: “IFAs need to take the John Lewis approach to life, which is to not to compete purely on price.”

He added customers who refuse to pay fees are the ones IFAs often do not want as they are most likely to complain.