The Financial Conduct Authority has warned its focus on the way firms treat vulnerable clients will not be a "one-off exercise", as it published its long-awaited final guidance on the subject.
In the paper out today (February 23) the City watchdog warned firms could expect to be asked to demonstrate how their business model, actions and culture ensured the fair treatment of all customers, including those deemed vulnerable, on a regular basis.
The guidance could also be relevant in any enforcement cases against firms under its watch, it warned.
The regulator is asking firms to offer "practical and emotional support" to frontline staff dealing with vulnerable consumers and ensure the fair treatment of this client demographic was "embedded across the workforce".
The FCA also said some firms, especially larger ones, might need to carry out proactive data analysis to identify where vulnerable customers were more likely to suffer harm or identify "patches of poor staff knowledge and performance".
The FCA said: "Firms should note that the way we supervise the treatment of vulnerable consumers will be integrated into our supervision, it will not be a one-off supervisory exercise.
"For example, we may ask for information about the treatment of vulnerable customers in any supervisory work relevant to the fair treatment of consumers, including during our regular interactions or as part of our proactive supervisory work."
Data published by the FCA earlier this month found the coronavirus pandemic had propelled the number of vulnerable adults in the UK to almost 28m last year prompting warnings of growing financial inequality among the population.
Between March and October the the number of adults with characteristics of vulnerability increased by 3.7m to 27.7m, a 15 per cent increase on the number identified in February 2020 before the first wave of the pandemic hit the UK.
Nisha Arora, director of consumer & retail policy at the FCA, said it was more important than ever that firms got the treatment of vulnerable customers "right".
She added: "The guidance being announced today will help ensure vulnerable consumers are treated fairly and achieve outcomes as good as other consumers.
"While some firms have made significant progress, we want to see all firms across sectors taking steps to understand and respond to the needs of their customers, particularly those who are most vulnerable to harm."
Source: FCA
The FCA has sharpened its focus on vulnerable clients over the past few years, warning in July 2020 that vulnerability was sometimes "not considered by firms or positively exploited for gain"
Keith Richards, chief executive of the Personal Finance Society, said the FCA had been "crystal clear" in its expectations.
He added: "At the heart of this sits the principles of fair treatment and inclusion for all.
"It is important that firms don’t just develop a culture of feedback and learning from their own frontlines but unite as a profession to share good practice with their peers, which was why we launched the Financial Vulnerability Taskforce - we look forward to continuing our work with the FCA in this space."
Hundreds of advisers have adopted the professional body's newly launched Financial Vulnerability Charter in a move hailed as an industry "stepping up with a plan of action".
Since the PFS launched its charter in January, 350 advisers have committed to its nine core pledges, which aim to support the advice industry in addressing the various forms of consumer vulnerability, improve client outcomes and increase access to financial advice.
Adviser interaction
Stephen Lowe, group communications director at Just Group, said advisers were keen to learn more about how best to serve vulnerable clients.
He said: "Firms have a great deal of flexibility how they comply with their responsibilities and it is useful to see examples of firms that are getting it right and to understand where the regulator thinks they are falling short.
"Advisers are definitely keen to learn more so they can interact with vulnerable clients sensitively and appropriately.
"Proof of their appetite is shown by the fact that over 6,000 advisers have used our online vulnerability training tool, developed in conjunction with SOLLA, which we launched in 2019."
Read: 'Ditch the suit': an adviser's take on dealing with vulnerable clients
rachel.mortimer@ft.com
