Consumer advocate Choice has proposed a compensation scheme to boost confidence in market-linked investments, such as cash management and property trusts.
"Consumers who have suffered loss because of wrongdoing by financial advisers and service providers should be entitled to compensation for losses, even where the guilty party is unable to pay," a statement by Choice said.
Under the proposal, consumers would be able to claim compensation up to the value of $500,000 for any breach of a financial services licensee's legal obligations.
This would be funded by a post-event levy across the financial services industry.
"Confidence is the key in the current environment and that is why a bold initiative like this, with both government and industry working together, is needed," Choice director of policy and campaigns Gordon Renouf said.
Consumer groups have sought this reform for more than six years and a last resort compensation scheme is long overdue, he said.
According to Choice, the Government must develop a market solution, rather than just dealing with issues currently arising in the cash management and mortgage sectors, because once those problems are settled, new ones will arise.
"A last resort compensation fund for investments is the missing piece of the consumer protection landscape," Choice said.
