Vulnerability is a topic of huge debate in the financial services arena but with 1.5m more UK adults showing signs of vulnerability since the start of the coronavirus pandemic, there is an even greater need for advisers to be able to spot, and take appropriate levels of care with vulnerable clients.
The reality is that advisers in the equity release industry are probably already working with vulnerable people.
For example, the average age of a more2life client is 70 years old, so there is a higher chance they could have physical disabilities, long-term illness, and/or hearing or visual impairments.
The various issues caused by Covid-19 could mean that greater numbers of older borrowers will be deemed vulnerable over the coming years. It is therefore vital for advisers to have the right skillset to be able to meet these clients’ needs.
What is vulnerability?
The Financial Conduct Authority defines a vulnerable consumer as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”
It is a wide-ranging definition that goes beyond poor mental health, ill-health and physical disability. It can be permanent or temporary, and there are lots of reasons why someone may be vulnerable.
The FCA has identified four main drivers of vulnerability:
- Health – physical disability, severe or long-term illness, hearing or visual impairments, poor mental health, addiction, and low mental capacity or cognitive disabilities.
- Life events – caring responsibilities, bereavement, income shock, relationship breakdown, domestic abuse, and retirement.
- Resilience – low or erratic income, over-indebtedness, low savings, and low emotional resilience.
- Capability – low knowledge or confidence in managing finances, poor literacy or numeracy skills, low English language skills, learning impairments, and no or low access to help and support.
These are challenges that many people face in their daily lives, even without the additional hardships caused by the pandemic.
A widescale issue
Recent FCA research suggests that almost half of the UK adult population has, at some time or other, shown at least one characteristic of vulnerability.
A research report by more2life - Who are you calling vulnerable? - suggests that the proportion of vulnerable clients in the equity release sector could be much higher.
Three quarters of people aged 65 and over would be eligible for enhanced terms if they qualified for an equity release plan which suggests at least some of them have illnesses serious enough to be considered vulnerable.
