Consumer duty  

Nearly 40% of vulnerable investors ‘falling through the cracks’

Nearly 40% of vulnerable investors ‘falling through the cracks’
A survey of over 200 intermediaries revealed that they could only identify 14 per cent of their own client banks as “vulnerable” (Photo: Francesco Ungaro/Pexels)

Nearly 40 per cent of vulnerable investors are “falling through the cracks”, research from Research in Finance has suggested.

The research surveyed nearly 2,000 investors and found that over half (51 per cent) of them exhibited vulnerable characteristics.

However, a separate survey of over 200 intermediaries revealed they could only identify 14 per cent of their own client banks as “vulnerable”.

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This implies there is a number of vulnerable investors not being identified as such.

This study comes at a time when the Financial Conduct Authority is poised to reveal in a new report how firms are addressing UK consumer duty.

Research in Finance chief operating officer, Adele Gray, said: “The FCA vulnerability review has put a spotlight on how advice firms are identifying vulnerable customers within their banks of clients.

“Investors most susceptible to harm need to be recognised in order for them to be treated in a way that meets the guidelines. 

“However, for advisers, this process is proving difficult. It’s a concern because, without identification, these vulnerable investors are less likely to receive good outcomes and more likely to slip through the net.”

Additionally, Research in Finance recounted the results of its recent survey of 1,743 investors and 210 intermediaries. 

In this survey, questions were asked around the FCA’s four categories - adverse health conditions, recent life events, capability issues and financial resilience – to determine how advice firms were identifying vulnerable customers within their client banks.

Research in Finance argued the issue is “front and centre” in the minds of those in the financial sector, with one of the advisers the research spoke to branding it a “minefield” and a “nightmare” to navigate. 

Meanwhile, another said that they feel that they’re “probably not asking the right questions” to identify the characteristics of vulnerability in their clients.

tom.dunstan@ft.com

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