The scarcity mindset
Vulnerability is often accompanied by a scarcity mindset. When a particular resource – food, money, companionship – is scarce, humans tend to hyper-focus on that resource, prioritising it to the exclusion of any long-term thinking.
According to behavioural scientists Sendhil Mullainathan and Eldar Shafir, this scarcity mindset is the equivalent of losing 14 IQ points or a full night’s sleep.
When someone has this mindset, they prioritise the here and now and neglect to think about the consequences. There is a circularity to vulnerability, with problems in one area exacerbating problems elsewhere. If people don’t eat or heat their homes, they often end up hospital.
There is a social cost in not dealing with these problems, as well as the very real human cost for individuals and their families.
Assessing vulnerability
Many firms struggle to assess vulnerability, partly as vulnerable people do not always see themselves in that way. Even those who do will worry about stigmatisation and the potential consequences of ‘confessing’ to a vulnerability: will it affect credit decisions, for example?
This means people often do not seek out the help they need, even when it is there for them. For example, only 63 per cent that are entitled to pension credit claim it, according to government statistics. That is equivalent to 880,000 people who could have additional financial support in retirement.
Organisations all have a role in identifying vulnerability in the people that use their services and directing them to products and services that can help them.
In identifying these vulnerabilities, organisations have several resources available to them – the use of artificial intelligence, for example, in interrogating vast swathes of data.
There is no substitute for lived experts, talking to people who have vulnerabilities and finding the pathways that work for them.
Behavioural science and proper training are also factors in building effective strategies for vulnerable people.
Furthermore, firms need to remember that their colleagues could also be vulnerable, so it is important there is support in place for them too.
What is clear is that organisations need to look at people as individuals and show empathy. Listening to their needs, rather than assuming they need a certain type of support, is key to dealing sensitively and intuitively to those with vulnerabilities.
The consumer duty is setting the stage, however firms need to and can go further to help people who, without the right level of support, are at risk of detriment when dealing with their finances.
Collaboration is also key to building a universal solution. Assembling a coalition of the willing and determined across the industry involving providers, advisers, government and third sector will help to bring about enduring change and ensure that all our customers are treated with care and respect.
