Clients who sustain losses from poor financial advice will get compensation if a US$50m insurance scheme is approved in Australia.

Big banks in the country expressed conditional support for the planned industry-wide insurance scheme, which will be funded by financial institutions.

Senator Nick Xenophon has said he will introduce draft legislation that will provide compensation for customers found to be financially damaged by poor financial advice.

ANZ Banking Group deputy chief executive, Graham Hodges, said the insurance scheme would fill a gap in the market, but that big banks should not be forced to fund the scheme because they had sufficient financial strength and could payout as required for their mistakes.

Senator Xenophon said the current system affords victims a slim chance of getting compensation for damages because of the enormous costs in pursuing a case against corporations.