According to the University of Melbourne's paper FinFuture – The Future of Personal Finance in Australia, the total losses for Australian households during the last five years equates to around $201 billion.
The research, which included consultation with industry, regulators, consumer advocates, legal professionals, consultants and academics as well as consumer research over a period of 18 months, has called for the implementation of national financial wellbeing framework along with a restructuring of the finance sector.
According to the paper, consumer outcomes and duty of care should form the basis for professional standards in the industry and its regulation.
Further, the researchers have called for the creation of a government advisory group as well as a ‘National Financial Wellbeing Agency' that would coordinate industry, regulators and consumer groups.
They also recommend compulsory, evidence-based financial literacy training to improve Australians’ low rates of financial literacy and capability.
It is proposed that these plans be implemented over a ten-year period.
Melbourne Law School's director of banking and finance law, and co-author of the report, Andrew Godwin, said regulation reform in the sector was a vital step in improving consumer outcomes.
“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,” Associate Professor Godwin said.
“Financial service providers should be subject to a duty to consider financial wellbeing in performing their functions and services.”
Other recommended changes for the finance sector included the establishment of national research centres to support industry service and technological innovation, stronger data protection and free financial health checks and advice throughout different points in consumers’ lives.
The report also identified other inefficiencies in the finance and wealth sectors aside from misconduct, including high fees for payments, high costs associated with the management of superannuation accounts and often low quality of financial advice.
Remediation costs to the industry resulting from the royal commission have been estimated to be around $10 billion.
Co-author Carsten Murawski from the university’s Faculty for Business and Economics said many Australians had lost trust in financial institutions, which was holding them back from improving their financial situation.
“About two thirds of Australians face some level of financial vulnerability and stress,” Professor Murawski said.
“Financial concerns are now the number one concern among young people.”
For example, the research found that the first barrier to Australians improving their financial situation was that they "do not trust financial institutions or advisers", which was followed closely by respondents saying that they found their finances "overwhelming:.
Moving forward, the whitepaper said research will also have to be conducted on how emerging and existing technologies could be used to improve financial capabilities.
[Related: ASIC wealth investigations rise by 216%]