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How to assess suitability and risk for vulnerable clients

This article is part of
Guide to advising vulnerable clients

The paper describes this as “reviewing their policies and approaches to vulnerable customers, and ensure this mapping, and any actions flowing from it, is appropriately documented.”

Speaking to FTAdviser, James Dingwall, chief executive of Thistle Initiatives, says firms must prioritise this in order to make sure they are giving the right advice.   

He says: “It is really important firms understand their client base, know how to identify any vulnerable clients, and understand how to educate advisers to deal with them and bring them into the financial planning remit.”


The Deloitte paper summarises: “In particular, firms should assess whether further staff training may be needed to improve awareness and early detection of potential customer vulnerability.”

Lessons to learn

According to the key findings revealed by the FCA’s 2015 report into mortgage lenders’ arrears management and forbearance, there are learnings to be made from mortgage lenders. 

It said when it came to those people most at risk from any future rise in interest rates, many mortgage lenders had been: 

  • Identifying their most financially vulnerable customers.
  • Using credit reference agencies to analyse payment profiles, indebtedness, affordability and behavioural measures.
  • Stress-testing across different rate rise scenarios to identify the impact on contractual monthly installments.
  • Carrying out research to understand what customers know about the type of mortgage they hold, and what the potential impact of an interest rate rise would be for them.
  • Removing barriers that could prevent existing customers transferring to other products to lessen the impact of an interest rate rise.
  • Providing all front-line staff with training to help them recognise signs of financial difficulty and know when to refer customers to a specialist area.

According to Mr Richards: “It is critical for firms to identify a permanent or temporary state of vulnerability for any given client, and have embedded process that supports and provides appropriate solutions for them.”

On page 31 of the FCA’s Occasional Paper, under the heading ‘treating customers fairly’, the regulator states: “Our research points to frontline staff needing to know what to do, being empowered to act in an appropriate way that may be outside standard parameters, and feeling confident in doing so.

“Evidence points to products and services in general needing to be designed with realistic expectations about changes in circumstances in mind.”

Engagement on investment decisions

Mr Gammon also advises bringing other people into the loop when it comes to investment decisions. 

He explains: “For those who are always likely to be vulnerable, advisers can use their experience and a degree of emotional detachment to assist with suitability, but engaging with family or close friends might also be sensible.”

Claire Trott, head of pensions strategy for Technical Connection, says: “It is key that the vulnerable client has good independent, third-party support.

“This may be a family member or other third party, chosen by the client themselves.”

However, she strongly urges people to select a third party carefully, so this person can help both the adviser and the client through this difficult time.

Ms Trott adds: “To provide the client and adviser with the support needed, they must not be vulnerable themselves, and should have a good understanding of the issues being discussed, and the client’s situation.”