In August, the Financial Conduct Authority released its guidance consultation on vulnerable customers along with an updated financial lives survey with a vulnerability lens and 21 in-depth case studies.
As expected, it acknowledges the impact of Covid-19: it has exacerbated vulnerability and prompted different and lasting impact on those who have suffered as a direct or indirect consequence of the pandemic.
The FCA revealed a staggering 23 per cent in the UK have been furloughed or suffered a loss of income.
The prospect that only 50 per cent of people in the UK remain vulnerable, as identified in the 2017 financial lives survey, feels unlikely and advisers need to pay attention to vulnerability people now more than ever.
The guidance consultation – GC20/3 – makes it clear that vulnerable customers remain a priority and focus for the regulator – not only as a standalone objective – and will permeate through all of the regulator’s work as it applies a vulnerability lens to all supervisory and policy work.
GC20/3 elevates the pressure on advisers to start implementing the practical changes required throughout the organisation to evidence vulnerable people experience outcomes that are just as good as other consumers’ outcomes.
Key Points
- The FCA has acknowledged that Covid-19 has exacerbated vulnerability
- Capability to benefit vulnerable clients has been hastened
- Recognising vulnerable clients is a key challenge, with a focus on the skills needed to serve them
The FCA wants to see the issue being taken seriously and companies embedding a vulnerable-centric approach into culture, policies and across the full customer experience.
Senior managers will be asked to demonstrate the actions taken to embed good practice in culture, policies and process.
There will be a heightened intention to intervene where there is actual, or potential, harm to vulnerable customers and in 2023 the FCA will evaluate the actions companies have taken and whether there has been enough improvement.
This year has become a lost year for vulnerable customer regulation, but one where we have all learned a great deal about what it means to be vulnerable and how we can support particular needs.
The pandemic has had an impact on us all, whether through the mental health implications of lockdown, changes to income or illness.
In a business sense, advisers have had to adapt quickly to the changes imposed by working from home.
| The four key drivers of vulnerability | |||
|---|---|---|---|
| Health | Life events | Resilience | Capability |
| Physical disability | Caring responsibilities | Low or erratic income | Low knowledge or confidence in managing financial matters |
| Severe or long-term illness | Bereavement | Over indebtedness | Poor literacy or numeracy skills |
| Hearing or visual impairments | Income shock | Low savings | Low English skills |
| Poor mental health | Relationship breakdown | Low emotional resilience | Poor or non-existent digital skills |
| Low mental capacity or cognitive disabilities | Having non-standard requirements such as ex-offenders, care leavers, refugees | Lack of support structure | Learning impairments |
Source: FCA
That has hastened the implementation of capability that could benefit vulnerable customers (for example, digital authority), which may have taken much longer to happen under ‘normal’ circumstances.
I have witnessed a noticeable upturn in people wanting to have a conversation through lockdown on the practical challenges of helping vulnerable customers. In February this year, we launched the Vulnerability Radar in a joint venture with the Tax-Incentivised Savings Association.
This free tool permits advisers to assess and benchmark their capability around supporting vulnerable customers and, to date, more than 100 companies have signed up across a broad spectrum of the industry.
Results from the tool so far suggest that there is real interest in engaging with the challenge of vulnerability and a thirst for answers.
However, the FCA’s fair treatment of vulnerable customers initiative, unlike more mechanical pieces of regulation, is not a one-and-done activity. It will require change over the medium term to make it a silent part of business as usual, not unlike the regulator’s treating customers fairly initiative.
