Future of Financial Advice reforms have "caused a real problem for the middle market", Count Financial chief executive David Lane told delegates at the Financial Services Council annual conference.
"The reason you've seen a lot of firms both handing back AFSLs (Australian financial services licences) and putting them up for sale is because they looked around and said, 'it doesn't make economic sense to do it at this size'."
AFSLs are "just a liability", he added.
"When you are a small firm putting yourself up for sale with this giant potential liability, it's very hard to make the numbers work and to sell yourself, and that will be a real challenge for the middle market," Mr Lane said.
John De Zwart, managing director of Centrepoint Alliance, the parent company of vertically integrated non-aligned dealer group Professional Investment Services, said the role of an independent AFSL is now very limited.
"Pretty much all of the independents now have either developed or are in the process of developing their vertical integration. There only is one further stage of consolidation because there's not much left - we will see further consolidation," he said.
There is a market share game going on between the big institutions and when these assets become available they will be absorbed into one of the bigger institutions, he added.
"As the leading independent provider in the market, we see it as a growth space but it's only a matter of time before that sector disappears. It's up to us to evolve it and we're moving fast to evolve it. We have evolved it to some extent but it's just not sustainable."
Perpetual managing director and chief executive Geoff Lloyd described it as "just another cycle", adding "we've been here before, we will be again".
Many advice businesses have run out of growth, and it's a tough market without headline growth, he said.
"Some businesses are saying it's an opportunity for them. There are businesses who have invested in their model and are very focused and will seize that," Mr Lloyd said.
However, he was more positive about the outlook for the advice industry overall.
"There's never been a better time for the value of advice," he said. "We're on the cusp of becoming a true profession, and true professions always find ways to grow.
"True professions raise the bar on entry and education standards and if you don't meet it you're out. That's where we're at. You can't bring everybody with you - clients, or staff, or planners."
