The pandemic has much to answer for, including a substantial rise in the number of people in vulnerable circumstances.
The Financial Conduct Authority’s Financial Lives 2020 survey: The impact of coronavirus, undertaken in October 2020, revealed that more than half (53 per cent) of adults were displaying a characteristic of vulnerability, representing an increase of more than 3m since the pandemic began.
In the past, the perception of vulnerability was narrow.
Sweeping judgements were made − often based on age − bypassing the many other reasons why some people should be treated with particular care, whether they are 31 or 91. However, times have moved on, and nowadays it is assessed across a wider range of factors.
The FCA defines a vulnerable customer as someone who is particularly susceptible to harm, especially when a company does not act with the right levels of care.
Characteristics of vulnerability, according to the regulator, include poor health (encompassing mental health); challenging life events; low resilience to cope with financial or emotional shocks; and poor literacy or numeracy abilities.
The pandemic has, of course, been a challenging life event in itself. Research by Royal London, published in August this year, found that 15.9m people felt more financially vulnerable than they had before it began.
Looking at the breadth of potential current vulnerabilities, Tom Conner, director at pensions, investments and insurance specialist Drewberry, says: “In the past, identifying vulnerable clients was based far more on physical factors, like age, hearing or visual impairment, whereas today the list of potential vulnerabilities is extensive.
"You more or less need to start from the point that every client could be vulnerable until it is determined otherwise.
“There is a duty of care to identify clients that could be vulnerable and to have the conversation about how advice is best provided to them. For example, we recently advised a client with hearing difficulties. The client said they usually conduct telephone calls using BT's Relay service, which converts voice to text, so we advised them via Relay and followed up with emails reconfirming everything that was discussed.”
A spectrum of risk
It is also important to be aware that customer vulnerability can be an evolving situation, as Peter Hamilton, head of market engagement at Zurich, explains: “It’s not possible to identify vulnerable customers simply through a checklist or against specific criteria. Wellbeing can be seen as a spectrum of risk.
“All customers are at risk of their wellbeing suffering and this risk is increased by characteristics of vulnerability related to their health, life events, resilience and capability.
"This can result in customers having additional or different needs and they may move up and down the risk spectrum, depending on their personal circumstances, at the time of interaction with us.