Why the FCA's guidance on vulnerable clients doesn't help advisers


The Financial Conduct Authority's recent guidance on vulnerable clients does not go far enough to help advisers, according to the guests on the latest episode of the FTAdviser Podcast.

In July the FCA published its latest guidance on vulnerable clients which said the regulator had found "many examples of good practice" in the industry, with firms "thinking carefully about their customers and potential vulnerability".

The regulator also warned it was aware of cases where vulnerability was either "not considered by firms or positively exploited for gain".

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But speaking on the latest episode of the FTAdviser Podcast, Pimfa's senior policy adviser Alex Roberts said there needed to be more guidance from the FCA on third party access issues.

She said: "The guidance does emphasise the importance about flexibility and treating your customers with flexibility and allowing third party access in appropriate situations but our firms, as regulated firms, have a myriad of rules and regulations that they have to follow, ranging from ID and address verification to money laundering requirements and GDPR issues - all these things which were formulated without vulnerable customers in mind.

"Obviously as an adviser you sometimes find yourself in the invidious position of [...] breaching the rules in order to accommodate the vulnerable customer - an example is the difficulty when you are trying to protect a customer from scams and frauds but at the same time allowing legitimate third party support.

"So I think it is balancing these conflicting needs which often is a difficulty for advisers and whilst there has been some [...] clarification within the guidance provided by the FCA, I think there is still scope for more guidance in this area because there are pitfalls in relation to trying to balance these opposing needs."

Claudia Clay, director of risk and regulation at advice firm The Private Office, agreed more guidance could be "helpful".

She said: "Firms who start their journey by doing the right thing for their client will always end up in the right place because that is the main driver and if it does involve third parties then there are protocols that can be followed to make sure they are legitimate, there are legal documents to support it and there are third party professional advisers that can be brought into the process as well.

"We do have a number of real life examples where we have faced that exact challenge and so far we have managed to deal with them in an appropriate way and in a way that protects the client first and foremost and delivers in our regulatory obligations as well."

She added that GDPR did make the issue of handling vulnerable clients "slightly tricky" but said it wasn't "insurmountable".

Ms Roberts and Ms Clay also discussed whether it's possible to meet the FCA's guidance on vulnerable clients while using video conferencing, what the most common pitfalls are when advising vulnerable clients and what advisers can learn about vulnerable clients from the coronavirus pandemic.