Dig a little deeper
Many of the characteristics of concern relating to the health and life event drivers can be assessed during an initial fact-finding process or when discussing life changes during the investment journey.
However, it is important that the presence of a vulnerability characteristic (eg, visual impairment) is not the only factor that is considered; the interference it causes for a client to carry out day-to-day activities and the impact it may have on life and investment challenges is essential.
When being assessed within a clinical setting, presenting symptoms of social anxiety, for example, only forms part of the diagnosis; a clinician must also gather information on the severity, which is influenced by the frequency, duration, and onset of symptoms, as well as the interference on daily living.
Merely recording that a client has a vulnerability characteristic or not does not allow us to understand the extent in which that impacts them, nor the level of support that would be required.
It is also not ideal to use a binary approach when assessing vulnerability.
For example, there is a need to distinguish those who have no health concerns or their condition/illness does not affect them at all, from those who may be somewhat affected, and from those who are significantly impacted.
These differences can influence actions that advisers are required to take, and so a more appropriate method would be to classify clients between having a low, moderate, or high level of vulnerability.
Although research by Dynamic Planner shows that demographic information such as age, household income, household size, number of children, ethnicity, employment status, and marital status are significant predictors of the number of characteristics that an individual is found to be vulnerable against, these results are weak.
Existing research suggests that protected characteristics alone, such as age, sex, or ethnicity should not be used to determine a client’s level of vulnerability.
Such information can be useful for understanding client needs, but they should not be used to assess vulnerability as all clients are different, and any client can become vulnerable at any point in time.
It is important to use a detailed assessment that considers the individual and their circumstances.
Dynamic Planner research
Taking all factors into consideration, Dynamic Planner has developed a vulnerability assessment in line with the FCA guidelines and the Financial Lives survey algorithm, including the following:
- Psychometric items measuring subjective vulnerability.
- Interference questions used to assess level of vulnerability of health and life events.
- Vulnerability level scored on a scale (low, moderate, high).
- Items to examine additional capabilities.
Dynamic Planner’s vulnerability assessment obtained similar findings to the Financial Lives survey 2022 report, where 47 per cent of respondents were identified as vulnerable for at least one of the four drivers, Dynamic Planner found that 44.2 per cent of respondents have a “high” level of vulnerability for at least one driver.
