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Fair treatment of vulnerable client concerns given clarity

25 July 2019

The FCA has published a series of guidelines for firms on the fair treatment of vulnerable customers, amid concerns there is not enough consistency across the financial services sector.

The proposed guidelines include how firms can understand the needs of vulnerable consumers, ensuring staff have the skills and capabilities needed and what practical steps can be taken to improve firms’ treatment of vulnerable customers. While the consultation will not provide a checklist of required actions, it is designed to provide options for ways in which firms can comply with the principles.

Christopher Woolard, executive director of strategy and competition at the FCA, said protecting vulnerable consumers was a key priority for the regulator and firms must explicitly embed the fair treatment of such customers into their culture.

Where it finds that firms are not doing enough to ensure that consumers are treated fairly, it will take action.

Woolard said: “Firms need to take particular care to ensure that vulnerable consumers are treated fairly as they may be more likely to experience harm. The guidance should drive improvements across the industry, improving outcomes for millions of vulnerable consumers.”

The FCA defined a vulnerable consumer as someone who “due to their personal circumstances is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.” It identified impaired health, life events such as bereavement or a relationship breakdown, low resilience to financial or emotional shocks and a lack of knowledge and confidence in dealing with money matters as the key drivers behind vulnerability. According to the FCA, half of UK adults (25.6 million people) display one or more characteristics of being potentially vulnerable.

Tom Selby, senior analyst at AJ Bell, commented: “Ensuring vulnerable and potentially vulnerable customers are treated appropriately is one of the biggest challenges facing the FCA and the wider financial services industry.

There is a common misconception that vulnerability is just about older people or those suffering from diagnosed illnesses. The reality is every single person will, at some stage in their lives, be vulnerable to one degree or another.

He added: “The complex, deeply personal and often transient nature of vulnerability can make it difficult to spot and respond to. The FCA is therefore right to focus on ensuring appropriate responses to vulnerability are embedded in firms’ cultures. This is not a problem that can be solved through rule changes – instead appropriate responses need to be woven into the fabric of all financial services firms, including pension providers.”

Stephen Lowe, communications director at Just Group (pictured), said: “We are pleased to see the regulator pushing on with its vulnerability work. Our own research into how intermediaries and providers are responding to the challenge revealed the majority of firms are on the case with nearly all – 94% – stating they are treating the issue seriously and six in 10 saying the issue is on the agenda at board level.

“However, organisations who took part in the study are at very different stages of their journey, with some still struggling to develop and implement vulnerability policies and others a long way towards embedding vulnerability into the core of their business.

“Firms recognise that this is a very difficult area to get right and are keen to work co-operatively with the regulator to resolve the many challenges that lie ahead. Today’s consultation is useful for removing some of the uncertainty and adding clarity on where FCA sees policy heading.”

The guidance will be consulted on in two stages, with the FCA asking for feedback for the first stage of the consultation by 4 October.

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