Money may not buy happiness, but a lack of it has become a major weight on Australians’ wellbeing.

And serious reform is needed to fix the problem.

Two-thirds of Australians are facing financial vulnerability or stress, and money has become the No.1 cause for concern among young Australians, with wide-ranging consequences for physical and mental health.

Now a team from the University of Melbourne is calling for the creation of a national financial wellbeing framework – to be administered by a newly formed national agency – to completely reshape the way Australians access, use and perceive personal financial services.

“We need to reduce the complexity of regulation and be clearer about the standard we expect from people working in the finance community by tying regulation more closely to outcomes,” University of Melbourne lecturer Chris Culnane, a co-author of the FinFuture white paper, said.

Massive reforms key to wellbeing

One of the key problems uncovered by the white paper was a disconnect between how Australia’s “product-centric and sales-focused” financial services sector is organised and the outcomes it should be trying to achieve.

Dr Culnane and his co-authors argue that fixing this will require further professionalisation of the finance sector and the introduction of minimum quality standards for practitioners and people responsible for training them, similar to those in place in the legal and medical sectors.

Customers’ rights and obligations also need to be made more transparent, to overcome the “high degree of information asymmetry” that puts customers at a disadvantage when it comes to financial contracts.

“This white paper proposes that consumer contracts [eg. credit contracts] be accompanied by key terms summaries so that individuals can consider the impact, effectiveness and fitness for purpose of the contract,” the white paper said.

To further bolster consumers’ wellbeing, basic financial services like transaction accounts, small loans and limited types of insurance should also be recognised as ‘essential services’, to guarantee the quality of those services and ensure everyone has access to them.

Services with similar features should also be priced in line with what other competitors are charging too, in order to weed out predatory pricing practices.

Trust deficit hurting consumers

A seperate study conducted by the University of Melbourne found 54 per cent of Australians have been affected by banking misconduct in the past five years, and these experiences coupled with the royal commission findings have decimated the public’s faith in financial services.

While the public outcry is “unsurprising”, the report found a lack of trust in financial institutions was also the most commonly given reason consumers felt they were unable to improve their own financial position.

The worry then becomes that Australians who could improve their wellbeing aren’t able to do so because they can’t trust service providers that can help them.

“Australians deserve a financial services sector they can trust to work with to improve their financial wellbeing,” the report said.

“Trust is integral to the financial services sector. Without trust, people are less likely to take on advice or financial services products, which could help improve their financial wellbeing.”