Am I Vulnerable?

Kay Leslie Compliance Director

In a ‘Dear CEO’ letter issued in 2020, the FCA indicated that a key focus in its ongoing supervision will be on vulnerable customers. A vulnerable customer is defined as someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm does not appear to be acting with appropriate levels of care.

Any customer could become vulnerable at any time, the risk of this is affected by four main factors (key drivers of vulnerability):

• Health – health conditions or illnesses that affect the ability to carry out day-to-day tasks

• Life events – such as bereavement, job loss or relationship breakdown

• Resilience – low ability to withstand financial or emotional shocks

• Capability – a lack of financial capability, literacy or digital literacy/skills. In the FCA 2020 Financial Lives Survey (ending in February 2020) the findings suggested that just under half of UK adults, aged 18 and over (24.1 million people), display one or more of these characteristics. This had risen to 27.7 million as of October 2020.

You don’t need to use the term ‘vulnerable’ in your interactions with consumers but you should focus on what harm or disadvantage customers may be vulnerable to and how they can respond appropriately.

All those involved in delivering advice to customers should take time to understand: the circumstances and characteristics of consumers in their target market or customer base being or becoming vulnerable; what harm(s) or disadvantage(s) they may be vulnerable to, how this might affect the consumer experience and outcomes and what the firm can do to reduce the risk of harm. Acting early could prevent the risk of harm from growing or emerging.

We will be ensuring that our governance, processes and systems support all relevant advisers and staff to meet the needs of vulnerable customers when carrying out their roles. Anyone dealing with the financial affairs of the customer must understand their target market’s vulnerabilities and what this might mean in practice for their roles. This will mean that firms should ensure their staff are able to recognise characteristics of vulnerability (and adapt processes accordingly) but do not ‘probe’ customers too deeply simply because they think they need to in order to meet the requirements.

Ultimately, we all need to be proactive in offering support to customers and recognise their needs however we communicate with them. We need to be able to adapt our approach to deliver a service that meets the individual needs of vulnerable consumers and not discourage any additional time taken in delivering a great customer service. We know advisers may come across challenging situations and firms should be able to offer practical and emotional support where appropriate

. Firms should deliver good customer service that takes a flexible approach to the individual needs and circumstance of vulnerable customers and provide specialist services where appropriate.