New research from Huntswood reveals low level of vulnerability awareness among consumers which could risks wealth managers and financial advisers failing vulnerable customers.
The study from the consulting and customer solutions company found a growing proportion of the UK population is vulnerable, and an increasing number of people are unaware of their vulnerability.
This presents ‘significant challenges’ for the wealth management and financial adviser sectors if firms fail to recognise and support vulnerable customers at a time when the FCA expects firms to continue driving improvements in practice and outcomes, the firm said.
Some wealth management firms in the study reported less than 1% vulnerability among their client base, “which suggests they are not identifying those at risk”. New research from Huntswood showed that 51% of customers are now classified as vulnerable, compared to 44% in 2023. The firm said the rise is largely due to a near-doubling in cases of mental health conditions amongst consumers (10.2% in 2023, rising to 19.5% in 2024).A greater number of those surveyed also said they felt financially stressed in 2024 (16.7%), an increase from 14.1% in 2023.
The survey also found “a worrying number” of individuals are still unaware they are vulnerable (67% in 2023, falling to 53% in 2024).
Which mean that wealth managers could risk offering overly complex products that vulnerable customers, such as the elderly and financially inexperienced, may struggle to understand. Additionally, older clients may make unsuitable decisions due to impaired judgment.
Huntswood proposed several strategies to help wealth managers mitigate the risk of failing to support vulnerable customers.
- Implement an effective framework and education programme across firms and train staff on vulnerability
- Simplify communication employing plain language and visual aids to explain risks. Use different ways to communicate, especially with more complex products
- Enhance suitability checks and conduct regular reviews of client circumstances, risk tolerance and product suitability
- Introduce ethical training to help staff prioritise client interests and recognise vulnerability signs.
Martin Dodd, CEO of Huntswood, said: “Failure to support vulnerable customers presents a very real risk to wealth managers and financial advisers. Organisations must act now to ensure they are able to identify their vulnerable customers and deliver appropriate levels of service, not just because it is what the FCA expects, but because it is the right thing to do.
“The good news is that there is an increasing awareness from wealth managers of the circumstances that might make an individual vulnerable or require additional support. This increase in awareness is, in part, due to the proactive steps some wealth managers are taking to ask customers about their needs and prompt self-declarations.”
Siddharth Parashar, Managing Director, UK & Europe, ResultsCX, Huntswood’s parent company, added “Vulnerable customers often feel a more significant impact from a poor product or experience, so its important wealth managers get the basics right to reduce this, particularly in light of the FCA’s renewed focus in this area.
“Those wealth managers and financial advisers that are achieving excellent outcomes are vulnerability-aware and have a core service that is flexible and can provide support when needed. They are able to detect risks effectively, and, most importantly, have clear strategies that are built around the need for flexibility rather than trying to account for every potential customer circumstance, and can be easily enacted to mitigate those risks and continually improve and evolve.”
Main image: mohammed-kara-0bWnQEsdo3s-unsplash.
