One of the nation's major banks admits that the financial planning industry needs to "significantly" raise its game.
ANZ Bank deputy head Graham Hodges believes there should be a scheme to compensate customers where there has been a "mistake" in the financial advice they have received.
Mr Hodges said organisations that have sufficient financial strength should be allowed to self-insure, but those that don't should be required to take out some insurance.
"When you meet with the people who have gone through the extreme hardship ... where there is no one to go to, you can see why it is worthwhile putting in place a scheme," he told a Senate hearing into financial advice in Canberra on Tuesday.
"This is an industry that significantly needs to raise its game."
He believes the regulatory framework for the industry through the future of financial advice laws will result in better outcomes for consumers.
ANZ was embroiled in the Timbercorp managed investment scheme collapse as a major creditor.
Mr Hodges said while no ANZ financial adviser had recommended the scheme as an investment, advisers at ING which ANZ had acquired had.
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