How to help protect vulnerable clients from cold-callers

According to Nigel Bennett, sales and marketing director for InvestAcc Pension Administration Limited, the majority of advisers will have already educated their clients as to the dangers of scammers, and how to avoid them.

He comments: "One of the key skills of an adviser is to assess the validity of an investment, with a healthy dose of pessimism for anything which appears unusual."

But what about those clients who may not be aware they are being scammed in the first place? This is especially the case for vulnerable people, who are more likely to fall prey to a plausible-sounding cold-caller over and over. 

This is where financial advisers really come into their own, says Fiona Tait, technical director for Intelligent Pensions. 

"Financial advisers are in a better position to identify vulnerable clients as they are more likely to know them as an individual.

"Furthermore, most clients who have a good working relationship with an adviser would either dismiss another adviser approach or at least contact their adviser to discuss," Ms Tait explains.

Protecting vulnerable clients at all stages means acting with understanding and empathy, treating clients as individuals and tailoring actions and communications to their individual circumstances. Neil MacGillivray

But while advisers may be in a better position than most to see whether someone classes as 'vulnerable', to categorise a client thus is not easy and not always straightforward.

What is 'vulnerable'?

Vulnerability is often synonymous with 'elderly', and to some extent this is true: many of those who are duped by rogue callers tend to be elderly people who are living alone, and who are likely to be won over by a charming smile and someone who takes the time to speak with them.

Moreover, some scammers also prey on older people under the guise of authority, knowing this demographic is more likely to trust them. As Peter Bradshaw, national accounts director for Selectapension, comments: "The older generation often believe what they are told if they are approached by someone pretending to be from the police or from HM Revenue & Customs, whereas younger people tend to be more alert to scams.

"Also, older people tend to be more isolated so they need to know they can contact the Pensions Advisory Service or book a chat with Pension Wise. 

"[Fraud] is such a heinous crime. They are taking advantage of vulnerable people and betraying their trust. I think [perpetrators] should be given jail time with no access to the internet and no mobile phones."

But the fact is, financial vulnerability can affect anyone at any time in their lives. In 2015, the Financial Conduct Authority (FCA) published its occasional paper on Consumer Vulnerability and, in the Practitioner’s Pack attached to the paper, the FCA listed several situations in which a consumer might find themselves to be 'vulnerable'. 

These are: 

• Physical disability.
• Severe or long-term illness.
• Mental health problems.
• Low income and/or debt.
• Caring responsibilities (including operating a power of attorney).
• Being ‘older old’ – over 80, which is correlated with physical or mental impairment.
• Being young (correlated with less experience).
• Changes in circumstances, such as job loss, bereavement or divorce.
• Lack of English language skills.
• Non-standard requirements or credit history, such as armed forces personnel returning from abroad.

Many of the pension scams that are being investigated are targeting those in their 50s as they approach 55 - the date at which they can get hold of their pension money - but just because someone of 55 is not old, does not mean they are not vulnerable. 

Identifying vulnerable clients

Neil MacGillivray, head of technical support for James Hay, says a vulnerable client might not know or acknowledge they are vulnerable, so it is important for those working with them - advisers and providers alike - to help identify this. 

"We use 'vulnerability indicators' that can be identified at all touch points with the client," he says. "These can include receiving or experiencing the following behaviours in phone or written communications: repeated questions about the same subject, frequent requests for the information to be repeated, signs of confusion, seeking guidance in relation to basic decisions or information, agitation or uneasiness, to name a few.

"Unusual activity can also be a trigger for indicating vulnerability, such as sudden large income payments being requested, frequent switching of investments and frequent changes of mind in terms of instructions given."

Advisers should consider whether they have suitable processes in place, including the identification of potential vulnerable customers. Vince Smith-Hughes

Ms Tait says it will be useful for advisers to offer clients "regular reviews which might highlight any unusual requests and activity, and clear reference should be made to the threat of pension scams, together with directions to the relevant regulator's website."

Elaine Turtle, director of DP Pensions, comments: "Advisers will have a much closer relationship with their clients and so should be in a position to identify vulnerability at a much earlier stage.

"It would help if they could confirm the vulnerability to the pension provider - although this information exchange might not be possible under the data protection laws and under the incoming General Data Protection Regulations coming in."

She said firms should already have in place mechanisms to consider how to recognise a vulnerability, train staff on the issue and where to record the information, so the client's needs are understood.

According to Ms Turtle, this is becoming more of a regulatory issue: "Vulnerable clients appears to be a recurring theme from the Financial Conduct Authority (FCA) and firms should be considering a distinct vulnerable client policy to sit alongside existing treating customers fairly (TCF) policies."

This should be obvious, but as Vince Smith-Hughes, retirement expert for Prudential, concedes, this is not always carried out. 

"In a Prudential survey we did in 2017, only 17 per cent of advisers said they had specific guidelines in relation to vulnerable customers," he said.

"Advisers should consider whether they have suitable processes in place, including the identification of potential vulnerable customers."

He advocates encouraging family members or professional peers, such as solicitors, to get involved in major decisions.

Know the patterns

By hammering home the message that cold-callers operate in a certain fashion, the general public will eventually begin to recognise when they might be falling victim to a potential financial fraud, and can therefore protect themselves by putting that receiver down (or, more likely, ending the call on their smartphones).

Thankfully, cold-callers are free with their tricks of the trade: they've been giving advice over the internet to other potential phone nuisances. Take, for instance, this 28-step process to closing a deal on the phone, which advocates the use of a script, open-ended questions to try to condition the person on the other end of the line into giving away what matters to them. 

It is such a heinous crime. They are taking advantage of vulnerable people and betraying their trust. Peter Bradshaw

Being able to identify tricks, such as pressure sales or flattery, will help more people protect themselves and their vulnerable friends and family members against a possible pension scam.

Nigel Chambers, co-founder of CTC Software, believes "some consideration needs to be given as to how information on questionable investments can be more widely promoted and shared."

For him, the regulator should play a bigger role, perhaps by creating easier "tests", which could be made more readily available to consumers to help them understand if a deal looks "too good to be true".

Regulation 

There is regulation already in place that requires all clients to be given information before transfers or withdrawal of pension benefits, warning them about scams relating to pensions and/or pension withdrawal to fund investment.

Martin Tilley, director of technical services for Dentons Pension Management, comments: "Many providers already offer a helpline for clients where guidance and further warnings can be given. Advisers will provide similar warnings and advice."

But although this regulatory 'front line' of defense is in place, Mr Tilley says there is a further obstacle to its effectiveness. "The challenge is for these services to be accepted as more trustworthy than the scammers.

"Historic prejudices against the pension and advice industry unfortunately taint the memories of the age group now able to draw upon their pensions, so trust and credibility must be retained."

Tightening up on transfers is also a way to prevent scams. Regulation already exists that dictates people with £30,000 or above in a defined benefit pension pot must have authorised financial advice to transfer this out of their current scheme, but there is more that can be done by providers and scheme administrators.

Ben Fisher, consulting actuary for Xafinity Punter Southall, explains: "One should review the process around transfers, starting at the quotation stage by making sure members have the right information upfront. 

Providers can and do help clients, but it can be more difficult, since they have statutory obligations to fulfill, such as the client's right to transfer their pension. Fiona Tait

"The transfer payments need to be watertight to ensure potential scam warning signs are spotted."

For him, paper-based procedures are not enough: there should also be phone calls and better use of technology, as both Mr Bradshaw and Mr Chambers have also pointed out.

For smaller schemes with dedicated administrators, Mr Fisher says an administrator should, through routine dealings with a member, recognise signs of vulnerability and then put a red flag against their record.

"That way, if a transfer is requested in the future, extra steps can be taken to ensure the member understands what they are doing and, if necessary, protect them from a potential scam," Mr Fisher adds.

Future changes

However, financial advisers are not in abundance in the UK, and millions of people are not using financial advisers, so the likelihood is the majority of victims whose vulnerabilities are exploited will not have the advantage of an adviser's counsel and protection.

Ms Tait acknowledges: "Clients without an adviser are undoubtedly more vulnerable to a scam. Providers can and do help clients, but it can be more difficult, since they have statutory obligations to fulfill, such as the client's right to transfer their pension.

"That said, providers are required to provide information, such as [information about] the Scorpion Campaign, before they take their pension as cash or make a transfer.

"But while advisers and providers are aware of the issues surrounding scams, and are working to stop these, the scammers are clever."

She believes that providing increased guidance and warnings, particularly through the workplace, which highlight the need for advice could help the fight back. Mr Tilly adds providers could offer free workshops for non-advised clients or free sessions to those identified as 'vulnerable'.

Project Bloom, the cross-government, anti-scams taskforce being run by The Pensions Regulator, is continuing to monitor trends and share intelligence on emerging threats.

But the government recognises that even if a cold-calling ban is implemented, there could be problems with scammers shifting their operations overseas, for example. Therefore, the latest response from the government, answering the concerns laid out by the Work and Pensions Committee, acknowledged this needed to be addressed.

The joint HM Treasury and Department for Work and Pensions response said: "It is important to address the risk of scammers attempting to challenge or circumvent a ban, and to ensure the ban is workable, robust and less liable to legal challenge in the future."

But while these things are still being implemented, there is a need for advisers to continue to identify and protect clients whom they suspect are vulnerable. 

Mr MacGillivray adds: "Protecting vulnerable clients at all stages means acting with understanding and empathy, treating clients as individuals and tailoring actions and communications to their individual circumstances."

simoney.kyriakou@ft.com