The Association of Professional Financial Advisers (APFA) has called into question the amount of money spent each year by the Financial Services Compensation Scheme (FSCS) on recoveries.
The adviser organisation - previously the Association of IFAs - said the industry had "no idea" how cost effective the scheme's budget for recoveries has been.
The FSCS, which is paid for via annual levies from the financial services industry, has forecast it will spend a total of £7.7m in 2012/13 on recoveries. This has climbed from an original estimate of £3.9m for the period, and follows the £7.9m spent the previous year.
Chris Hannant, policy director at APFA, said: "Most of this [budget] will go on legal fees.
"These are significant numbers for the profession, but the worst of it is that we have no idea of how cost effective legal action has been.
"The FSCS's Half Year Review gives no detail at all as to what money has been recovered from legal actions so far. The Financial Services Authority must look closely at this issue. The FSCS needs to demonstrate that these recoveries are warranted and cost effective.
"Furthermore, there should now be a process for bringing an end to actions against advisers with a handful of cases. It cannot be cost effective to use City lawyers to pursue claims worth small amounts
