This is a subject close to my heart, having witnessed this many times in my (too many to admit) years in this industry, and currently having to deal with financial institutions on behalf of a family member with dementia.  Not wanting to vent my frustration here, but I will say that some of our experience has been nothing short of shocking.    

The pandemic kickstarted a major shift in perspective, with the FCA recognising that consumer protection needs to evolve with the ever-changing landscape of financial services.  Most of us will, at some point in our lives, either be, or know someone, who is in vulnerable circumstances.  So it isn't just me being on the receiving end of how financial firms handle those in vulnerable circumstances; it will inevitably come to us all.

‍

Unpacking the FCA’s recent consumer duty review

The FCA’s review of Firm’s treatment of customers in vulnerable circumstances is a positive start and part of their broader strategy to ensure that all consumers are treated fairly, regardless of their circumstances.  

The regulator analysed voluntary responses from 725 firms, where a review was carried out to evaluate whether firms are adequately identifying, understanding and supporting their customers in vulnerable circumstances, who may be more susceptible to harm and could potentially be disadvantaged when engaging with financial services.  

1500 consumers were also surveyed, but of course this data is relying on people self-reporting, when, in reality, the mere word ‘vulnerable’ conjures up negative connotations and may prevent someone from sharing this, so the stats could well be higher.  

‍

Steps IFA firms can take to meet their Consumer Duty

There are lots of positives in the review findings, but there are also areas that could be improved further.  

Whilst the review findings are very broad in terms of financial institutions, rather than specifically representing the IFA sector, there are steps IFA firms can take to meet their Consumer Duty:  

• Develop a strategy.  Think about how you identify and support clients in vulnerable circumstances.  This includes assessing the effectiveness of your current policies, procedures, and staff awareness. Strategies and policies and procedures might sound like dry terms; but they're the framework that means you can not only support all of your clients, but be exceptionally effective in the event of them dealing with challenging circumstances.

• Review your process.  We live in a fast-paced world of technology, where systems and the explosion of AI will help streamline internal processes, and in many ways enhance the client experience.  However, this process could potentially be the barrier to customers in vulnerable circumstances, rather than the people who follow the process.  This includes internal processes as well as the wider distribution chain, platforms, providers, client portals, systems, paraplanning, compliance……I could go on.  

• Have a consistent approach.  One of the most prominent findings of the review was the inconsistency in how firms identify and support customers.  This can lead to some clients potentially being overlooked.  

• Actively engage with your clients.  This may sound obvious, but if you don’t ask if your process works, you may inadvertently place a barrier that is not needed. We know the vast majority of advisers are naturally compassionate and empathetic with their clients; it's impossible not to be when you are so involved in their day to day lives. But what about the rest of the team and the systems being used? Understanding their impact on your clients could help inspire small tweaks that will make a big difference.

• Clear communication.  Offering different types of communication channels ensures all clients get access to support.  Ensure all communications are clear, concise and not full of jargon.  This includes suitability reports, which we at Verve have worked hard to simplify. We know this an ongoing challenge for firms but again, it's the empathy of being in someone else's shoes and whether what you have sent them will give them reassurance, or having them full of worry that they can't understand it!

‍

Consumer duty is a focus for 2025 and beyond

Our compliance team have seen a significant increase in queries from firms regarding clients in vulnerable circumstances, especially those who have lost capacity with an LPA in place and how firms should deal with this.  

Sadly, we are also seeing queries from firms on how to deal with clients who have lost capacity with no LPA in place.  

The FCA has been very clear on their Consumer Duty focus areas for 2025, and it is no surprise that the treatment of customers in vulnerable circumstances will continue to be a priority.  

We expect to see further initiatives and requests for data from firms.  The regulator has made it clear that robust action will be taken when they see poor outcomes.  

‍

If you would like to discuss this or any other compliance matter with one of our team, please do get in touch

‍

Source: https://www.fca.org.uk/publications/multi-firm-reviews/firms-treatment-vulnerable-customers

‍