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How to help advise vulnerable clients


Dealing with vulnerable clients is becoming a core focus for the Financial Conduct Authority (FCA) and advice firms need to have proper processes in place, experts have said.

James Dingwall, chief executive of Thistle Initiatives, said the first thing firms needed to do was understand their client base and what it looks like, and try to identify where there may be customers who would fit into the definition of a 'vulnerable client'.

He said: "There is still a perception that someone who is a vulnerable customer is someone who has a disability or someone who is very elderly, but it can take so many forms, such as mental illness.

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"Therefore, it is really important that firms understand their client base, know how to identify any vulnerable clients and understand how to educate advisers to deal with them and bring them into the financial planning remit."

In 2015, the FCA issued an occasional paper highlighting concerns that financial services providers were not treating vulnerable customers appropriately. 

In this document, the FCA said: "We want to help firms identify consumers in potentially vulnerable circumstances, and to attempt to describe what ‘good’ looks like in serving those consumers."

Since then, the regulator has been producing regular updates to ensure financial services firms are treating vulnerable customers appropriately and fairly. 

Keith Richards, chief executive of the Personal Finance Society, said he agreed with Mr Dingwall about the preconceptions people have about what is 'vulnerable'.

He said: "People think vulnerable means anyone over the age of 80 and therefore [advice] should be focused on how much exposure these clients should be given to equities, for example, but it is so much more than this.

"Everyone technically is a vulnerable customer. You have to take into account the individual needs of the client. Moreover, people at the same age may have completely different needs, so you cannot age categorise."

People in later years may have issues such as a breakdown in cognitive functions, which should be taken into account if the adviser is providing an ongoing service late in to retirement, but Mr Richards added it was important for advisers to be able to demonstrate how to deal with any vulnerable client, in any situation. 

According to Mr Dingwall, if firms wanted to ensure they are treating vulnerable clients appropriately, they should firstly identify if there are any vulnerable clients, or where vulnerability could be an issue, and set out a framework for dealing with it.

He also said: "Importantly, firms should invest in staff at all levels so they can identify anyone who could potentially be vulnerable."

The PFS is currently working with the FCA to create a framework of good practice CPD in this area. 

Mr Richards added: "It's not rocket science but at the same time. We have a duty to share with advisers what good practice looks like.