Consumer advocate Choice is urging the Federal Government to start up a compensation scheme for investors who have suffered after receiving poor financial advice.

Choice says consumers should be covered even when the guilty party is unable to pay because it’s insolvent or bankrupt.

Investors should also be able to claim compensation for any breach of the financial services licensees’ legal obligations.

Director Policy and Campaigns Gordon Renouf told insuranceNEWS.com.au confidence is the key to investing in the current economical environment.

“The problem at the moment is that we have situations where consumers can’t recover their money because an adviser is insolvent or has disappeared,” he said. “There are a couple of score of Westpoint advisers where the decision has gone in their favour.”

The Financial Ombudsman Service has been working on a proposal for the past three years since the collapse of Westpoint.

The proposal is understood to cover Choice’s concerns, but is still awaiting board approval.