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How can financial advisers support their vulnerable customers?

  • Describe how the FCA defines vulnerability
  • Explain the 'temporal nature' of the vulnerability
  • Identify how to create a 'safe space' for clients
CPD
Approx.30min

Meanwhile, it is imperative for financial advisers to give equal balance to psychological factors such as those identified under the FCA’s resilience and capability categories. Simply looking at objective facts and obvious factors like major life events and health conditions may not present the full picture needed to base support on. 

There are also technologically driven assessment tools that can help to identify financially vulnerable customers, which can combine clinical expertise with hard data to present a fact-based assessment of individuals and their circumstances, removing the subjectivity from the process.

Once a driver of financial vulnerability has been identified, the second step is to understand the link between that driver and the creation of a vulnerability. The imperative here is to assess the extent to which each driver impacts that person’s circumstances. In other words: which factors are making a tangible difference? 

It is only when the impact of the driver (or drivers) is fully understood that appropriate support mechanisms and responses can be adopted. 

Taking steps to support vulnerable customers

This leads to the third stage of the framework: support. Again, the rule of three can help advisers better understand the situation of the financially vulnerable customer and identify the optimum response pathway. 

First, what is the temporal nature of the situation? A customer may be financially at risk only temporarily, perhaps because they are in between employment or have suffered a breakdown of their relationship. Others may be permanently at risk (for example, a terminal injury or condition), while some could be experiencing fluctuating fortunes dependant on a wide range of circumstances. 

Second, where is the vulnerability rooted? Here, the factors could be individual (personal health circumstances), environmental (redundancy), institutional (use of jargon, selective communication channels) or even a mixture of all of these. 

Once advisers understand the aetiology, they can begin to identify appropriate responses. For example, if a financial adviser discovers through steps one and two that their customer is hard of hearing, and the company they deal with only communicates with them over the phone, it is likely that they are dealing with a permanent presentation that stems from an institutional root. 

The solution, in this case, would be simple. The financial adviser would set about changing the way the institution (or company) engages with the customer – email or live chat, for instance, would be an easier way for the customer to communicate. 

How to approach support provision

Now that the three-step framework of identify, link and support has been outlined, how can financial advisers ensure this is deployed in the most effective way possible? 

Although there are many nuances that individual advisers may adopt as part of their approach to provisioning support for at-risk customers, there are some best practice techniques and methods that all advisers should consider.