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Vulnerable customers: how can we bridge the gap

Few of us want to be labelled ‘vulnerable’. Which is why, over 76% of vulnerable adults don’t see themselves like this. And yet, the FCA estimates over 50% of adults are. 

Woman playing with child and dog

In the last few years, we’ve seen some increasing, and arguably much needed, focus on this – especially since Consumer Duty. During a recent chat on our Just Covered podcast, Robin Melley from The Financial Vulnerability Taskforce noted that even today he, “still meets advisers who say, ‘I don’t deal with vulnerable customers’”. His question back is, “do you only deal with healthy people?”. It’s unlikely. 

Almost everyone’s vulnerable at some point in their lives. It’s a far broader and more nuanced spectrum than, at first glance, many might think. 

So, how do we recognise it? And as an industry, how can we improve our conversations to support better long-term outcomes for those clients?

Understanding is key

The FCA defines vulnerability as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”. This might make them unable to deal with their finances effectively or more likely targets of fraud and abuse.

Broadly speaking, four triggers can create these circumstances:

  • Health: Perhaps the easiest to recognise – mental or physical events can cause temporary or long-term vulnerability. 
  • Life events: A divorce, job and income loss or bereavement can make someone vulnerable.
  • Resilience: More than just financial ability to cope with unexpected circumstances, it’s also the mental and emotional to adapt to challenges or traumas. 
  • Capability: Some factors, often beyond control, can limit ability to get better outcomes ­– like education, financial knowledge, digital literacy, experience, language barriers, and learning difficulties. 

Customers can belong to multiple categories simultaneously and may be either permanent or temporary.

Approaching conversations with care

Naturally, many clients aren’t open about these circumstances. Some aren’t even fully aware themselves. Listening carefully, looking out for subtle cues, knowing the right questions to ask will help pick up on them. 

Conversations should be treated with sensitivity, understanding and flexibility. Most importantly, take thorough care at each stage that the situation isn’t worsened by your advice or actions.  

Tips for following FCA guidance

In line with FCA guidance and Consumer Duty, the aim is to create outcomes at the same quality of someone without vulnerability triggers. As advisers, we should all be doing our bit to improve outcomes across the board. 

Our advice to firms is to start thinking about what each section of the FCA guidance means to them. Here are some initial steps you can take to embed best practice into everyday operations: 

  • Upskill: All frontline staff must be appropriately trained and given practical and emotional support.
  • Review products and services: Consider the effects of products and services on vulnerable customers at every level. 
  • Improve customer service: Systems should be in place for vulnerable customers to disclose their needs. This means offering access to specialist support or third-party representation and handling sensitive information with care.
  • Monitor and evaluate: Regular assessments are essential to keep improving outcomes with an understand of what a good outcome likes like and monitoring it, including continuous practice and outcome reviews to ensure FCA standards are met.
  • Assess communications: Make sure all information about products and services is easily understandable, like avoiding jargon and gained client feedback to ensure understanding. Offer a choice of communications channels that consider the potential needs of vulnerable customers. If necessary, record conversations and follow up in writing for additional support.

A fairer, better future for everyone

Vulnerability needs to be part of business as usual if we’re all going to level up as an industry. The benefits will be enormous. Not just for customers, but for improving public trust and confidence in our profession too. 

Also, be sure to catch up on our vulnerability-focused, Just Covered podcast with Robin Melley of the Financial Vulnerability Taskforce.

For further reading, I recommend these valuable resources: