“The subject of vulnerability remains a complex and sensitive challenge, covering a broad spectrum of consumers’ circumstances and their individual reaction to it.
“The overall average scores we have seen in the vulnerability radar have gradually improved incrementally since it launched, which reflects that the fair treatment of vulnerable customers is not a cliff edge piece of work. It will never be completed.
“Firms need to evidence a continuous cycle of improvement to better understand different conditions and circumstances and refine their response.”
Lessons from the past
In a November letter to chief executives of wealth managers and stockbrokers, the FCA said it expected firms to reassess the vulnerability status of their consumers.
Particular mention was made to the 49 per cent of portfolio managers and 69 per cent of stockbrokers surveyed who identified no vulnerable consumers. This was despite the fact that 50 per cent of consumers will be classified as vulnerable over their lifetime.
“If companies are only reporting low or single figure proportions, then it is likely they will be asked for further measures,” says Andrew Gething, managing director of MorganAsh, a provider of consumer vulnerability management software.
“This could include the scope of vulnerabilities, how they assess all customers, and not just those who volunteer their vulnerability.
“Then, how they are monitoring these vulnerabilities through the lifecycle of the product; and finally, how they are reporting on the outcomes for the vulnerable cohorts compared to the resilient.
“This requires good data to assemble these reports, so explaining how the data is assembled consistently is a cornerstone of reporting capability.”
Likewise, it is important that firms consider instances and share best practice where advice has been directly impacted because of a client’s vulnerable situation, says SimplyBiz’s head of policy, Sandy McGregor.
The type of information that could be valuable and anonymised where appropriate, he says, would be the nature of the vulnerability identified: was it disclosed or identified throughout the sales process, is it permanent or temporary, how has it changed the outcome of the advice, product and/or service? Are there any future special arrangements in place, and have these dealings led to any changes in how the firm deals with future clients?
“All of this information should help build knowledge and capabilities within the firm and also feed into any ongoing review of the firm’s vulnerable persons policy,” McGregor adds.
With the treatment of vulnerable consumers being a consistent regulatory theme since 2015, increasing in focus over the past three years after the pandemic, and featuring prominently in the consumer duty, the FCA can be expected to want to see real change, says BDO's Barnwell.
