Despite repeated regulatory guidance on how to handle vulnerable customers the Financial Ombudsman Service is still seeing significant evidence of financial advisers failing such individuals.
Too many avoidable complaints from vulnerable clients land at Fos, a spokesperson for the ombudsman has told Financial Adviser, even though the Financial Conduct Authority issued guidelines on dealing with such individuals in December 2014 and in February 2015.
“While it is encouraging some banks, insurance companies and advisers have made a commitment to tackling these problems, too many of the complaints we see could have been avoided without the need for the ombudsman to sort things out,” a Fos spokesperson said.
Advisers need tailored approaches, not one-size-fits-all box-ticking, when it comes to vulnerable clients, the spokesman for Fos said.
A vulnerable consumer is someone who, “due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”, according to the FCA’s February paper.
“Many consumers in vulnerable circumstances are not receiving fair treatment from their financial services providers,” it said.
The duty of advisers to vulnerable clients hit the headlines earlier this month, after the Fos published a decision criticising Portal Financial for transferring the pension of an illiterate client.
Mrs W wanted tax-free cash from her defined benefit scheme despite the firm advising her against it.
Portal deemed her an insistent client, and after several telephone conversations eventually sent her forms to sign to acknowledge the action was not recommended, before making the transfer.
She later complained to the ombudsman. Fos upheld her complaint, saying any signed written statements could not be assumed to be fully understood.
The advice occurred in September 2012, before the latest FCA guidance on providing for vulnerable clients. But a Fos spokesperson said the level of the consumer’s illiteracy still meant greater care was needed from the adviser.
Age, physical or mental health, caring responsibilities and life-changing events such as redundancy, relationship breakdown or bereavement, could all could mean someone is put into a vulnerable position, the spokesman for Fos said.
“Many of the people we speak to find financial services hard to understand or challenging to deal with, so we can only imagine how hard it can be for someone experiencing mental health difficulties, who have a disability or have sensitive personal circumstances that might affect them trying to navigate the often complicated world of finance,” the Fos said in a statement.
The ombudsman’s stance is backed up by the FCA’s February 2015 paper, which stated: “Financial services need to be able to adapt to the changing circumstances that real life throws at people, rather than being designed for the mythical perfect customer who never experiences difficulty”.
Martin Wheatley, the regulator’s then chief executive, admitted at the time “it’s a challenge for regulators and firms alike,” with FCA research finding inaccurate or overzealous approaches to regulations which prevent firms meeting the needs of vulnerable consumers.