Elliot Daniels, Head of Compliance at Truly Independent says that when it comes to vulnerability, there are common barriers to applying an effective approach in a lack of training, evidence and tools.
Vulnerability is not a new issue for our industry. The Financial Conduct Authority’s finalised guidance on the fair treatment of vulnerable customers is now over five years old [1].
Consumer Duty has, however, given the regulator more teeth in its approach. A firm’s efforts to address vulnerability can now be scrutinised through the lens of the broad-in-scope consumer support outcome.
Indeed, earlier this year the FCA announced that it will be contacting firms to understand specifically what steps are being taken to support bereaved customers.
This suggests that the regulator is not convinced we are doing enough – and, given that only 47% of bereaved customers questioned for one survey felt that they had been sufficiently supported [2], it sounds like clients might agree.
The FCA’s drivers of vulnerability are broad – so broad, in fact, that it is nigh on impossible to go through life without experiencing at least one of them.
We all know how we would like to be treated in these circumstances. In fact, I would say with confidence that most of us also know exactly how we would approach the matter if it was instead the experience of a close friend.
So why does the same not apply when it comes to clients? I have been on both sides of vulnerable clients policies, having had to write and adhere to them. In my experience, the barriers to applying an effective approach are often the same.
Lack of training
The first barrier is generally training. What is vulnerability? How do we identify it? Broad-spectrum compliance takes some of the blame here – how many firms are guilty of operating a policy that confidently labels any client over the age of 75 as vulnerable?
Of course, age does bring an increased likelihood of experiencing genuine drivers of vulnerability such as health issues, carer responsibilities and bereavement. But how many firms practise the same absolutism when dealing with an 18-year-old with no financial experience?
Clearly, there are subtleties to vulnerability which require a more nuanced approach than simply asking: “How old are you?”
How many firms are actively exploring this with their staff?
When we become less prescriptive in how we identify potential vulnerability – and when we start instead from a place of empathy – we become far more likely to spot a client who needs our help.
Lack of evidence
The second barrier is one that any individual who has either received or conducted a file review will be all too familiar with. It might be summed up as follows: “If it’s not written down, it didn’t happen!”
A driver of vulnerability being identified does not automatically mean that a client is vulnerable, and in many cases an adviser will conduct a tactful assessment before satisfying themselves that said client is in a position to proceed.
Take Mrs Smith – recently divorced (a life-event driver of vulnerability) but clearly delighted to be out of her unhappy marriage and excited to take on life’s next adventure.
Vulnerable? Probably not. But if all the file says is that Mrs Smith signed her divorce papers yesterday then this could indicate to a third party that vulnerability was simply not considered – rather than demonstrating that the adviser in fact conducted a thoughtful and proportionate assessment.
Getting everything out of one’s head and on to paper can be a challenge, particularly for a busy adviser, but not doing so is often to do a greater disservice.
Lack of tools
The final barrier is an empty toolkit. What should one do if a client is actually identified as vulnerable? Again, poor policy is often to blame here.
Why is it that inviting a client to have someone attend a meeting with them is widely considered to be all that is required to satisfy our duty of care?
Of course, there are very few people who would not benefit from this, but it is still a blunt instrument. What if the client refuses?
Does support for Mr Jones, who has hearing difficulties, end with inviting him to have his neighbour sit in on his private financial review?
Perhaps he would be better supported by his adviser offering to communicate primarily by email/text or by following up with written summaries of any verbal conversations.
We segment our clients based on their common characteristics and use this to identify suitable solutions, so why not do the same for vulnerable clients when deciding how best to support them?
Conclusion
Clearly, there is more to vulnerability than is documented in a firm’s policy. Empathy must be encouraged, discretion must be applied, and a firm must put weight behind its commitment to providing appropriate customer support.
At its core, treating vulnerable clients appropriately may be about asking yourself one simple question: “What would I want to happen if it were my loved one?”
Sources:
[1] See Financial Conduct Authority: Guidance for Firms on the Fair Treatment of Vulnerable Customers, February 2021 – https://www.fca.org.uk/publication/finalised-guidance/fg21-1.pdf.
[2] See Critical Research and Financial Conduct Authority: Vulnerability Review: Improving Understanding of the Outcomes for Consumers in Vulnerable Circumstances When Engaging with Financial Services Firms, May 2024 – https://www.fca.org.uk/publication/external-research/vulnerability-review-improving-outcomes-consumers-engaging-financial-services-firms.pdf.
Main image: vulnerability, jan-bullish–BKFyUHvbno-unsplash
