Regulation  

What advisers need to know about serving vulnerable clients

What advisers need to know about serving vulnerable clients

The Financial Conduct Authority has published a guide for firms on how to deal with vulnerable clients after it found some were still not meeting its expectations.

In a guidance consultation out today (July 23) the regulator laid out what it expects from the industry and promised to take action against those which continue to fail at treating such consumers fairly. 

The FCA defined a vulnerable consumer as "someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care".

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The regulator has been clear the guidance did not create any "additional legal or regulatory" obligations or sector-specific rules on firms, asking only that companies take a "sensible" approach to interpreting the material.

The regulator did not provide a "checklist of required action" but rather "options" for ways firms can comply with the overriding principles.

It listed four areas for financial services firms to consider: understanding the needs of vulnerable consumers, skills and capability of staff, taking practical action, and monitoring and evaluation.  

1 Understanding the needs of vulnerable consumers 

There are several regulatory principles which already require firms in the financial services industry to understand the needs of vulnerable customers and treat them fairly, but now the FCA has suggested practical ways in which this can be achieved. 

The regulator suggested firms should be "proactive" in understanding the extent of vulnerability in their target market, with a particular focus on training staff to recognise the needs of vulnerable customers in both face-to-face and telephone meetings. 

For firms which primarily interact with customers through digital channels, the regulator said staff should be on the look-out for signs of vulnerability or the need for extra support. 

The FCA said: "For example, some robo-advice tools flag support available from a human adviser if customers display certain behaviours, such as hovering for a long time before inputting information, pressing help buttons, or entering inconsistent information."

The regulator also suggested firms should consider material published by charities and trade bodies to help them understand the indicators of vulnerability.

It wants firms to be more proactive about carrying out market research, such as surveys or focus groups, to understand the risk of harm for vulnerable customers in their particular sector and to put in place an internal vulnerability policy, to help raise awareness throughout a firm.

Finally, firms should consider what they can learn from complaints received by their customers.

2 Skills and capability of staff 

The FCA placed an emphasis on the impact frontline staff within an organisation can have on vulnerable customers as a "vital touch point".

According to the regulator frontline staff may not always be aware of policies that were implemented by management.

Therefore firms should ensure all staff, in particular those on the frontline, have the appropriate skills and knowledge to treat vulnerable customers fairly.

This includes understanding what type of information they should seek from customers to determine their vulnerability.