Aifa says the requirements could prove to be counter-productive by penalising firms with good compliance support.
Increasing the minimum requirement to £20,000 will pose a serious threat to adviser firms that are already struggling in the difficult financial climate.
The trade body also warned that more firms may decide to make advisers self-employed to reduce their fixed costs so that they have lower capital requirements .
Director of policy Andrew Strange says: “The impact of the requirements could ultimately lead to some firms reconsidering their authorisations with the FSA and actually result in less capital in the industry.
“This is not good for firms, or consumers.”
Strange says the FSA has not provided any justification for the “phenomenal” rise in capital.
He says: “Aifa urges the FSA to look at regulatory dividends to reward those businesses which are well run and well capitalised.
“Risk based regulation is entirely appropriate, and positive risk factors should be considered.
“We urge the FSA to reconsider their stance on this and we shall be engaging with them over the proposals announced today and work closely with them to ensure that the correct outcomes are reached.”