The upcoming consumer duty provides a timely reminder of the importance of putting vulnerable client care at the heart of the financial advice process.
While advisers have been working hard to protect vulnerable clients for many years, the new regulations are designed to further enhance standards of care and ensure clients receive the outcomes they are expecting from financial products and services.
Encouragingly, a recent report by consultancy firm AKG on vulnerable clients, which we were proud to sponsor, found that advisers had strong and coherent views on what constitutes a vulnerable client.
Two-thirds felt well prepared for the Financial Conduct Authority’s vulnerable customer framework, and the majority said they were ready to comply with the requirements.
However, many of the advice firms interviewed saw more challenges than opportunities moving forward.
These challenges included how to identify potentially vulnerable clients without using the ‘V’ word; monitoring and responding to issues; and the time, resource and costs involved.
Avoiding the ‘V’ word
Financial advisers are in a prime position to identify and monitor vulnerability due to the long-term and ongoing nature of the adviser-client relationship.
But a key concern among advisers is how to start the conversation without appearing uncaring or patronising.
When broaching the subject, it’s important not to use the term ‘vulnerability’.
There’s also no need to go into specific details of the illness/life event; instead, it’s about understanding the impact, how long it has been going on, the client’s experience of it, and what assistance they’re receiving.
Questions to ask might include:
- What are you finding hard?
- Does it stop you doing things?
- How long has it been going on?
- Have you experienced this before?
- Is anyone helping you with this?
It may help to view the conversation as a natural part of getting to know your client. The client’s objectives, time horizon, and attitude to risk are all factors that could be impacted by a life event, such as divorce or terminal illness, for example.
Another challenge is knowing where your responsibilities as an adviser end.If you’re advising clients to set up a power of attorney or take out financial protection, this could also offer a natural way of weaving the subject into the conversation.
It’s also important to recognise that the conversation can be difficult. It takes a certain level of emotional maturity and it’s important to manage your own wellbeing to ensure you’re not unduly affected.
Responding to issues
Knowing the best way to respond to vulnerabilities isn’t straightforward, as it depends on the client’s individual circumstances. It isn’t a tick-box exercise, nor is it a case of ‘because of X, we should do Y’.
If a client has lost their sight, for example, it doesn’t automatically mean that everything should be provided to them in braille, as they might not have learnt to read it.
Instead, it’s about taking a client-led approach and asking, ‘What works for you?’
Another challenge is knowing where your responsibilities as an adviser end. If a client is making a poor decision, it’s important to establish whether that may be an indicator of vulnerability, while also recognising that they have the right to do so.
Advisers want to do the best for their clients, but it’s worth remembering that you can’t solve everyone’s problems and there’s only so much that you are able to do.
Finally, it is important for firms to keep updated records of a client’s needs, and for clients, having an up-to-date will and valid power of attorney are essential.
Access to this information is vital for everyone in a firm who deals with clients, so that there is consistency in how clients are supported, and this shared knowledge could also help to identify areas where you can enhance the overall standard of care for all clients.
If you have vulnerable clients or suspect that a client might be vulnerable, guidance on how to deal with this is available from a number of trusted sources.
As we prepare for the regulatory landscape to change further with the new consumer duty, we know that meeting the needs of vulnerable clients will be more important than ever.
Kevin Silvester is head of strategic adviser partnerships at RBC Brewin Dolphin
