The latest consultation paper on the proposed consumer duty did not suggest additional rules specifically on interactions with vulnerable people, but did note that vulnerable clients are at particular risk of harms – such as exploitation of behavioural biases or selling of products and services that are not fit for purpose – and particularly likely to benefit from higher standards across the board.
The FCA’s Financial Lives survey from October 2020 found that 27.7mn adults – or 53 per cent of all adults – displayed at least one vulnerability characteristic. However, when asked whether they saw themselves as vulnerable, only 14 per cent said yes.
The regulator’s guidance therefore places the onus of determining vulnerability on the adviser, identifying four key drivers – health, life events, resilience and capability – against which clients should be assessed, and requiring advisers to take those factors into account in their client interactions.
This is not an easy task. While some of the characteristics associated with the four drivers of vulnerability are fact based, others are open to interpretation. Assessing factors such as cognitive ability and mental health is a task for skilled professionals in those fields.
The consumer duty will make some of this more challenging because the FCA will be looking to businesses to do more to monitor and demonstrate their approach.
So, what can we practicably do? Using technology to put robust questionnaires in place, collect data that might be useful in assessing vulnerability and ensure regular updates – in particular before any changes are made to a customer’s investments – will be vital from a compliance perspective.
Many advisers already have the interpersonal skills and flexibility of approach that make them trusted partners in challenging circumstances. But this does not come naturally to everyone. Businesses will need to be able to show that they have training and development programmes to help their advisers recognise the drivers of vulnerability and take them into account in their interactions.
Catching up with my friend, I was glad to learn that my thoughts about the type of adviser her aunt needed had meant she was able to ask around and find the right person. But client vulnerability remains an ever-present challenge, and one we must all do our best to address.
Ben Goss is chief executive of Dynamic Planner