As the consumer duty deadline edges closer, recent data suggests that advisers in the later-life lending space have improved when it comes to spotting vulnerability in customers.
According to More2Life’s bi-annual report on the later-life lending market, released today (June 8), advisers have done a better job at spotting vulnerabilities in customers this year than in previous years.
Based on research of over 300 advisers, 30 per cent said they have seen clients in the last 12 months that they consider to be vulnerable, compared to 15 per cent in 2021.
More2Life has said this increase was driven by the reduction in advisers claiming clients have no signs of vulnerability, rather than an overall increase in vulnerable clients.
In 2021, 20 per cent of advisers claimed their clients had no vulnerability compared to only 12 per cent this year.
The increase in the number of advisers who said they have seen vulnerable clients in the last year was also driven by a rise in the number of advisers who believe 80 per cent of clients they support have some sort of vulnerability - rising from 10 per cent in 2021 to 17 per cent in 2023.
Most common types of vulnerability | 2023 | 2021 | 2019 |
Financial challenges not related to cost-of-living crisis – e.g. Interest-only mortgage | 43% | 38% | 42% |
They are of an advanced age | 42% | 50% | 52% |
Life changing event – e.g. divorce/bereavement | 36% | 38% | 37% |
Financially impacted by cost-of-living crisis | 31% | n/a | n/a |
They have been diagnosed with the onset of ill-health | 14% | 18% | 19% |
Source: More2Life
“The need to identify and support vulnerable customers has been a focus for the later life lending industry for some time and the upcoming consumer duty deadline has made this even more important,” Ben Waugh, managing director of More2Life said.
Waugh noted that the results from the survey suggest that advisers are becoming increasingly better at identifying customers who need additional support and time to find the right option for their individual needs.
“While financial pressure from the cost-of-living crisis has been identified as a stressor for some, other challenges such [as] worries around the need to repay interest-only mortgages, advanced age and dealing with a life changing event have remained consistent,” Waugh added.
In his view, the additional time and resources firms have devoted to supporting these customers will pay dividends.
Giving thought to clients' vulnerability characteristics has become particularly important since the pandemic and the current cost of living crisis.
From the end of July, the Financial Conduct Authority expects firms to take action to better support customers, particularly those with characteristics of vulnerability.
Most identified vulnerability characteristics
According to the research from More2Life, 31 per cent of advisers said the most common type of vulnerability they saw was in customers financially impacted by the cost-of-living crisis.
Related to this, 24 per cent of advisers said they found that clients were more financially stressed than before and 23 per cent said that clients they spoke to had “more clear needs and fewer aspirations”.
Likewise, advisers reported that retirement incomes were being stretched, with 15 per cent saying clients were more likely to need to boost their income.
Some 16 per cent of advisers said clients were more open to discussing options such as equity release.
Despite this increase in economic-related vulnerabilities, the primary reasons advisers identified customers as being vulnerable has remained consistent both pre and post pandemic.
Almost half, 43 per cent, of people are looking for support with financial challenges that are not related to the cost-of-living crisis such as an interest-only mortgage while 42 per cent cited customers being of an advanced age.
jane.matthews@ft.com
