The current coronavirus Covid-19 pandemic and the efforts being taken across the globe to stem its spread could have significant implications for how financial advisers deal with and look after vulnerable and potentially vulnerable clients.
As well as changing the way we work, live and interact, the so-called lockdown measures imposed in the UK could put more clients at risk of becoming vulnerable, whether through isolation, anxiety or some other mental health issue.
Recent years have seen a growing awareness around consumer vulnerability - and how client interactions with financial advisers could potentially improve their circumstances or, conversely, make them worse.
Pressure is coming from every direction.
The Financial Conduct Authority (FCA) has made it apparent that the fair treatment of vulnerable customers is extremely important to it.
|The four key drivers of vulnerability|
|Physical disability||Caring responsibilities||Low or erratic income||Low knowledge or confidence in handling financial matters|
|Severe or long-term illness||Bereavement||Over indebtedness||Poor literacy or numeracy skills|
|Hearing or visual impairments||Income shock||Low savings||Low English language skills|
|Poor mental health||Relationship breakdown||Low emotional resilience||Poor or non-existent digital skills|
|Low mental capacity or cognitive disabilities||Having non-standard requirements such as ex-offenders, care leavers, refugees||Lack of support structure||Learning impairments|
Draft guidance published last year made clear some of the regulator’s expectations.
In this draft guidance, the FCA said it wants firms to be “more focused on ensuring that the outcomes experienced by vulnerable consumers are at least as good as those of other consumers”.
This is due to be followed up with a second part - including a cost-benefit analysis - this year, although the publication of the update has been delayed by the coronavirus disruption.
Despite this, noises coming from the FCA suggest this regulatory direction of travel is here to stay.
At the same time, consumer pressure on the subject is heating up.
Consumers no longer always just look at the bottom line when considering their options.
A company's reputation and social credentials increasingly form a part of their decision-making process.
The rise of the internet has meant word travels fast, and firms taking advantage of the vulnerable face potentially fatal consequences to their reputation if they are not careful.
With so much on the line, firms need to make sure they are providing a consistent experience for their clients which is fair and reasonable.
Ensuring this consistency of service generally requires implementing some sort of company-wide strategy or policy.
This should include best practice for when working with a vulnerable, or potentially vulnerable client, and empower staff to act or to pass on a client where appropriate.
It could also include practical help for them, such as guidance on referrals, and on data protection.
Assess what you already do
If you are starting from scratch with a vulnerability policy, a sensible place to start would be to audit your current vulnerability processes, if any exist.
Some firms have piecemeal policies or strategies, or staff may have adopted informal policies by themselves.
The issue with piecemeal approaches is they may have different objectives, and will inherently result in an inconsistent approach to vulnerability.
They may also have been developed out of a controlled environment, so the quality or appropriateness of these piecemeal policies cannot be guaranteed.