Some advisers often dismiss the concept of vulnerability if the client is wealthy, according to Jane Wilson, director of regulatory risk consulting at KPMG.
Speaking at Pimfa’s Consumer Duty Conference 2024, Wilson said the vulnerability of more affluent clients “doesn’t seem to be an issue” for some advisers.
She explained some factors of vulnerability are more visible than others.
For example, while physical illness is one of the most easily identifiable aspects of vulnerability, the less noticeable factor of mental illness could also affect a person's ability to make a decision.
Wilson looked at the factors that could affect client vulnerability and the fluidity of them.
According to the Financial Conduct Authority, the key drivers of vulnerability are health, life events, resilience, and capability.
She added these drivers “can affect you at any time in your life” and that being vulnerable is “something you can come into and come out of”.
“Their circumstances don’t necessarily define them as vulnerable, they’re just susceptible to harm,” she added.
As an example of this, she pointed to life events and stated that if clients experience events such as retirement, a job change, or divorce, it will affect their lives.
Wilson also pointed out the FCA is concerned the welfare of vulnerable consumers is not being taken seriously enough.
She pointed to a figure which showed that 49 per cent of portfolio managers identified no vulnerable customers within their customer base, which Wilson described as “crazy” and “just not true”.
“We know that 50 per cent of us are classified as vulnerable at some point, so how can you say nobody is vulnerable within your customer base?” she asked.
Areas of improvement
Wilson pointed out areas where advisers could provide better support for their vulnerable customers.
For example, firms could track vulnerable customers as well as address any gaps in data and servicing capabilities.
She said firms should stop ignoring the fact that customers are potentially vulnerable, or deny that they are, and should not automatically assess all clients over a certain age as vulnerable.
Wilson pointed to the FCA’s consumer duty to provide practical action firms could take in order to protect their vulnerable clients.
This included considering the potential positive and negative impacts of a product or service on a vulnerable client and taking vulnerable customers into account at all stages of the product and service design process.
She advised setting up systems and processes in ways that would support and enable vulnerable clients to disclose their needs.
Lastly, Wilson said firms should ensure all communications and information about products and services are presented in ways that are easy to understand for consumers and consider how they communicate when talking to vulnerable consumers.
tom.dunstan@ft.com
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