On 16 June this year new guidance was issued by the Financial Conduct Authority explaining that it will no longer wait for customer duty to take effect before taking action to improve customer outcomes when it comes to vulnerability.
On top of this and just a couple of weeks later in July, new consumer duty detail was also released by the FCA.
Both the guidance, and indeed the new detail, have been long awaited. And while the FCA’s direction of travel on vulnerable customers has been clear for some time, the pressure caused by the cost of living crisis and the impending recession has brought even more urgency to the issue – and rightly so.
Because quite frankly, now is the time for firms to sit up and make sure they are supporting their vulnerable clients, while also taking note that there is an expectation to act promptly while the guidance moves to regulation and principles during the implementation period.
The issue is though, are firms really sitting up and taking action right now? Or are some still not taking this issue seriously enough?
Our perception is that until customer vulnerability plays a much bigger part on the boardroom agenda, progress will remain painfully slow. And this is not only a serious worry for the thousands of people out there who are financially vulnerable; in fact, the FCA estimates that one in two adults could be at risk of financial vulnerability. But it is also a very risky situation for financial institutions to put themselves in, especially given the increased regulatory scrutiny and probable fines if they fail to act accordingly.
So how can we switch the board, both executive and non-executive members, onto customer vulnerability?
Up until now, we have seen boardroom discussion in this area focus predominantly on customer complaints data, perhaps because it is more obvious and arguably easier to solve than financial vulnerability – it is also more readily available data.
In the meantime, the issue of customer vulnerability has remained somewhat a confusing and highly subjective issue for financial institutions to combat and one which they have not traditionally been trained in.
And certainly, the nuanced nature of financial vulnerability has made this process very difficult for customer-facing staff; this has been exacerbated by the pandemic, not least given the rising levels of mental health issues we are currently witnessing in the UK. So much so in fact that symptoms of depression, anxiety and other potentially debilitating conditions have almost doubled in the UK during the pandemic.
That being said, some good progress has been made, not least due to better tech being deployed around vulnerability identification (leading to better data) and vulnerability working groups being set up in many larger financial institutions. This is a good start.
The challenge remains however, that there is a large disjoint between the three main groups that will need to tackle the issue of customer vulnerability – namely the board, the advocates leading the vulnerability working groups or indeed those who are championing the issue and the more operational customer-facing staff themselves.