Experts say reform to Australia’s personal finance sector is vital for the future wellbeing of Australian society.

A new paper by University of Melbourne academics calls for urgent action to address current and future financial challenges and to improve outcomes for all Australians.

The authors, comprising specialists from finance, law, computer science and service science, say the sector needs to regain the public’s trust by committing to a shared purpose: serving the community by improving individuals’ financial wellbeing.

Australians are losing trust in financial institutions, which holds them back from improving their financial situation, according to co-author Professor Carsten Murawski.

“About two-thirds of Australians face some level of financial vulnerability and stress. Financial concerns are now the number one concern among young people,” Professor Murawski said.

A nationally representative study commissioned by the University in the wake of the Royal Commission found that more than half the population (54 per cent of Australians) had been negatively affected by misconduct and other issues with financial service providers over the previous five years, with total estimated losses to households of $201 billion.

The White Paper recommends the adoption of a National Financial Wellbeing Framework to define important financial wellbeing outcomes and set professional standards, as well as the establishment of a National Financial Wellbeing Agency responsible for whole-of-system coordination, including guidance on regulation.

Additionally, it recommends compulsory, evidenced-based financial literacy training be introduced in schools, TAFEs and universities to improve Australia’s low rates of financial literacy and capability.

“We need to reduce the complexity of regulation and be clearer about the standards we expect from people working in the finance community by tying regulation more closely to outcomes,” says co-author Associate Professor Godwin.

“Financial service providers should be subject to a duty to consider financial wellbeing in performing their functions and services.”