Senator Paul Scarr questioned how complicated schemes that would be difficult for even seasoned investors to understand could operate without a legal requirement to provide such advice.
That came at a Senate inquiry examining the Sterling Income Trust which targeted elderly investors to sign long-term tenancy agreements and use returns from lump-sum investments to pay rent.
The $30 million managed investment scheme collapsed in 2019.
Senator Scarr said an obligation should be added to make those registering schemes pay for independent financial and legal advice for potential investors that would be made public to ensure scrutiny.
"I've looked at the (product disclosure statements) ... I don't think any retail investor could be reasonably expected to get their head around all of the risks involved," he said.
"Which raises the question in my mind as to whether or not ... the law should actually permit this product to be sold to a retail investor who does not have the benefit of that advice."
But representatives from the financial sector disagreed it would have much impact protecting investors.
CPA Australia senior manager Michael Davidson said balancing the risks of an investment would still come down to a person's ability to read and comprehend disclosure documents that are currently required.
"There's a fair chance even with those extra statements, they're not going to read them," he said.
And Financial Planning Association of Australia policy head Ben Marshan called on the corporate regulator - the Australian Securities and Investments Commission - to do more scrutinising potential schemes before they went to market.
"If the regulator is not regulating these products then we need to stop calling them a regulator, and start calling them an administrator," he said.
The inquiry continues.
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