The treatment of vulnerable customers by financial services firms has been an area of FCA focus for many years, because vulnerable customers often have additional needs and don’t always experience the same outcomes as other customers. Consumer Duty has renewed interest in the treatment of vulnerable customers, as the importance of treating them appropriately and fairly is woven throughout the Duty.
We recently put out a talking regulation piece on our LinkedIn account to make our followers aware that some months ago, the FCA announced that it would conduct a review of how firms are treating customers in vulnerable circumstances. Consequently, a number of our clients have received questionnaires from the FCA, asking them about what they have done to understand the needs of their vulnerable customers and support them.
We are also aware that the FCA has followed up the questionnaires by asking some firms for copies of relevant documentation and has arranged interviews with them to discuss their approach to dealing with vulnerable customers. The FCA plans to publish their findings later this year and we expect that there will be further guidance and perhaps specific vulnerable customer supervisory reviews to follow.
Why might vulnerable customers not experience the same outcomes as other customers?
Sometimes vulnerable customers are excluded from buying products and services and they may be at greater risk of harm if things go wrong. For example, they:
- may not be able to manage their financial affairs as well as others;
- may not be aware of other product and service options which might be more suitable for them;
- may not be able to work out whether they are getting a fair deal, or not;
- may not be able to fully understand the advice or information they are being given about a product or service and so may not buy the one that is right for them; and
- may be easily influenced by others who are not acting in their best interests which could lead them to make poor and harmful decisions.
How firms deal with vulnerable customers can cause these customers to feel stressed, or upset, which can make them more vulnerable if they are not dealt with appropriately.
Understanding what makes a customer vulnerable
One of the main issues around vulnerable customers and regulated firms’ processes and procedures, is that many firms don’t believe that they have vulnerable customers or have not considered how or why their customers may be vulnerable.
This could be for a variety of reasons such as they view their products and services as low risk and suitable for all customers, or their customers are high-net-worth individuals and have sufficient cash to withstand losses, or that because the client has bought a similar product before, they understand what it is about. Some firms also classify all customers over a certain age as vulnerable. While these reasons may sometimes be very valid, they are not always correct and could mean that products, services and the support offered by some firms to their customers, may not be meeting their needs.
What must firms consider?
Having an understanding of how customers may be vulnerable will help firms to design products, services and support which are appropriate for them and will result in better outcomes.
When thinking about what kinds of vulnerabilities might arise in your customer base, it is important to take a broad view of what they might be. They may be related to a bereavement, illness, family circumstances, financial issues such as redundancy, little experience of managing money, being influenced by another party, or a disability which makes some communication channels difficult.
It is also important to remember that if someone is vulnerable at the moment, it does not mean that they will always be vulnerable. Their situation may be temporary because they are experiencing an issue at a particular time in their lives which will be resolved. Vulnerabilities may also be intermittent. As a result, customers may need different levels or kinds of support at different times depending on their situation.
Up to half of us will be classified as vulnerable at some stage in our lives and so it is highly likely that those of us working in financial services will have to deal with vulnerable customers at some stage in our careers, or we may need additional support ourselves.
How can firms work with vulnerable customers?
Dealing with vulnerable customers can be stressful for staff, often because staff are nervous of saying or doing the wrong thing which might make the situation worse and so supporting staff in dealing with vulnerable customers is crucial. It can be difficult to identify vulnerable customers as they may not want staff to know they are vulnerable, or may not realise they are vulnerable. They may not want any attention or fuss, or they may not feel comfortable sharing their issues.
However, when staff are confident in identifying vulnerable customers and comfortable dealing with what can sometimes be complex situations, the experience will be so much better for them and their customers. Support given to staff could include training them on how to spot a vulnerable customer, making them aware of the service options that are available, giving them the flexibility to deal with vulnerable customers in a more appropriate way, such as being able to take more time with them, or being able to ask a more experienced colleague for help, if necessary.
Given the FCA’s focus on how vulnerable customers are treated and the outcomes they receive, we recommend that firms check whether they are correctly identifying customers who may be vulnerable and have processes in place to deal with them appropriately.
If you need support with considering how your customer may be vulnerable, identifying ways in which you can accommodate them, training for staff on vulnerable customers, or assessing whether you are meeting the FCA’s requirements, please get in touch.
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