That's according to Choice chief executive Alan Kirkland, who said a compensation scheme for victims of financial misconduct, who can't be paid when a firm goes under, does not go far enough.
After the royal commission, the federal government committed to a Compensation Scheme of Last Resort (CLRS) "designed consistently" with recommendations made by the 2017 Ramsay report.
But Mr Kirkland said the proposed scheme was capped at $150,000 of compensation as opposed to the recommended $542,000, and does not cover all financial schemes.
"We understood (the government's commitment) to mean a broad scheme whereas what's proposed in the bill is pretty narrow, it doesn't go very far beyond financial advice," he told the Senate's economics committee.
Mr Kirkland said the community had lost trust in the financial system after people lost large amounts of money, adding that trust was yet to be restored.
He said it was crucial managed investment schemes - such as the collapsed Sterling Income Trust - were covered by the CLRS.
But Liberal senator Paul Scarr said he was concerned by Choice's recommendations to increase the compensation cap along with the cap on an overall levy to be covered by the industry.
"It does concern me you're looking at what becomes an open-ended scheme rather than a scheme which has clear barriers and parameters around it in relation to its cost," he said.
Senator Scarr added sectors were concerned the levy would see them "cross-subsidising" other sectors engaging in misconduct.
"Even within a sub-sector of industry there's a concern they'll be bearing the cost for the rogues within," he said.
The SMSF Association's Peter Burgess said he was "deeply concerned" the proposed CLRS did not include all market participants, particularly managed investment schemes.
"All investors regardless of the financial product they chose should have a genuine opportunity to seek financial compensation if they suffer losses due to the misconduct of others," he said.
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