Advised investors are four times less likely to be vulnerable than the UK population, a new report from Dynamic Planner has revealed.
The analysis, aligned with key questions and the algorithm of the FCA’s Financial Lives Survey, found that just 10% of advised investors had a vulnerability characteristic of a moderate to high level. This was four times lower than the 47% identified by the FCA’s survey.
Dynamic Planner’s Financial Wellbeing Questionnaire considers vulnerability on a spectrum and finds significantly less advised clients are highly vulnerable according to their health, life events, resilience and capabilities, although a similar proportion may be affected to some extent.
While 41% of advised investors assessed have a health condition or illness, only 3% have a high level of vulnerability where their health affects their ability to carry out day-to-day activities. Almost a third (30%) experienced a challenging life event over the past 12 months but only 3% displayed high vulnerability as a result.
Advised investors have strong financial resilience, the data showed, with 61% saying they feel they can handle whatever financial difficulty comes their way and more than three quarters (76%) do not view domestic bills and credit commitments as a burden.
They also displayed emotional resilience, with just 16% stating that uncertainty can be an obstacle, compared to 49% who do not let uncertainty stop them from making financial decisions. The same number (49%) feel they are knowledgeable about financial matters and 79% feel confident in their abilities to manage their finances.
Dr Louis Williams, head of psychology and behavioural insights at Dynamic Planner, said: “While it’s no surprise that advised investors are on the whole less vulnerable than the general population, it is extremely positive that they have strong resilience and financial self-efficacy where a majority of those assessed felt that they could handle many financial decisions. This demonstrates the benefit of having access to professional financial advice and the positive impact on their financial wellbeing.
“However, research also shows that clients with these characteristics are also more likely to seek financial advice than those with lower confidence in their financial abilities. While FCA Guidance leaves who should be assessed for vulnerabilities to the discretion of the adviser, there are many characteristics that are quite often hidden, so we can really only know the true picture of vulnerabilities if all clients are assessed. Anyone can be vulnerable and clients can become vulnerable at any time.”
While there are many methods used to identify vulnerable characteristics, Williams said technology can play a key role in ensuring that all clients are given the same opportunity to uncover anything that could impact their financial future.
“Advisers could then discuss areas of vulnerability with clients to alleviate issues and ensure the best outcome possible,” she added.
