The FCA defines a vulnerable customer 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.” 

They're also clear that dealing appropriately with a potentially vulnerable customer goes beyond the parameters of Treating Customers Fairly, as they may need additional assistance in order to make informed decisions.

How do advisers identify when an older person may be vulnerable?

As we age, vulnerability increases and recent research by the FCA identified that 60% of UK adults aged 65+ show some characteristics of vulnerability, and 31% of those aged 85+ have low confidence in managing their money, however never assume older customers don’t understand, it's surprising how many of our customers do extensive research before they meet with their adviser

But it's not just ageing that can undermine understanding potentially complex financial products; there are a number of other situations which may impact individuals in an adverse way and impair judgement and decision making and advisers need to be in tune with the signals.

For example, individuals dealing with:

  • Personal debt
  • Low levels of numeracy and literacy
  • Health issues  - mental and physical
  • Disabilities
  • Bereavement
  • Loneliness
  • Cognitive decline
  • Duress from a third party

This demonstrates the issue of dealing with vulnerable customers is complex and it's vital to remember that there is no template and no one size fits all, especially not in later life. Flexibility to accommodate customers should be key not ‘nice to have’, and something that is often overlooked is that that customers will have changing expectations over time; thus the expectations of a 75 year old today will be very different over a 10-20 year time horizon.

Lastly don’t let age drive your treatment  of customers in later life – there are many variables that drive customer profiles such as healthy cognitive decline, unhealthy cognitive decline, impairments, critical life events etc, so don’t second guess any suspected issues.

How to identify and protect vulnerable clients

It's important to embed good practices into your advice process, which demonstrate a pro-active approach, and we've outlined some ideas below that might be helpful: 

  • Record conversations so that a customer can listen to it again
  • Tailor response to individual circumstances
  • Give the individual flexibility and a choice of communication channels, which can help those with sight or hearing issues, physical disabilities or those without access to the internet
  • Encourage the individual to involve family and friends in the process
  • Be flexible on meeting venue and timings to accommodate personal needs
  • Avoid using jargon and replay all key aspects of any discussion to ensure comprehension, and suggest they take whatever time is required before they make decisions based on any recommendations made 
  • Consider Power of Attorney. For individuals who unable to make financial decisions for themselves may they could benefit from a power of attorney appointed to act on their behalf.
  • Record and provide evidence of training on the topic, through qualifications and CPD 

The FCA have a strong focus on this issue and have published a number of papers on the subject in recent years, with further guidance for Independent Financial Advisers expected in the near future. You can read their Financial Lives reports by visiting their website.  
If you need any further help please call us on 03330 048444.