Q. In light of the Financial Conduct Authority’s recent guidance consultation, what can companies do to protect their vulnerable clients?
A. Vulnerability is at an all-time high. As the FCA pointed out in its recent best practice guidance consultation on the topic, almost half of UK adults display at least one sign of vulnerability at some point in their life.
That could be anything from physical and mental health issues or bereavement, to job insecurity and poor financial resilience.
Add a global pandemic into the mix, and you could argue all of your clients have the potential to be vulnerable right now.
Many businesses have carefully considered and effective strategies in place to manage vulnerable clients.
Nevertheless, we often see inconsistency across the industry, and even within individual companies.
Siloed departments means vulnerability might be seen as a problem for frontline staff to deal with, and as a result it is often only considered at specific stages of the client journey.
While the FCA’s finalised guidance is due to be published later this year, there are things you can do now to enhance your approach and meet regulatory expectations.
Vulnerability needs to be considered at every stage of the client journey – even as far back in the process as designing your service and choosing distribution channels. But with each team under pressure to deliver different priorities, this is often easier said than done.
This is where culture comes in. A key FCA expectation is for you to ensure your culture focuses staff, products, services and processes on the fair treatment of vulnerable clients and that the outcomes achieved for these clients “are at least as good as those of other consumers”.
Understand your clients
To demonstrate that you have thoroughly embedded consideration of vulnerable clients into your culture, show that you have an understanding of their needs and of the harm that can arise if these needs are not met.
Identifying vulnerability can be a minefield, no matter how client-focused your culture is. Not only can the characteristics of vulnerability be transient, but your client might not be open to sharing any sensitive issues with you. While it is generally considered that there are four key drivers of vulnerability – health, life events, resilience and capability – these will reveal themselves differently in different sections of society and be impacted by factors such as age.
Using internal data to segment your client base means you can start to build a better picture of the most pertinent issues that will affect them and map out the ways that vulnerability might manifest itself.
Review current practices
Vulnerability is a precarious situation, so examine your current policies, processes and procedures to ensure you are not doing more harm than good. They need to be flexible enough so that your client-facing staff are empowered to make decisions and take action in the best interests of the client.