"Rather than trying to work out whether your customer is vulnerable, why don’t we assume that all customers are vulnerable and support them according to the FCA’s guidelines?"
There is much said about the Financial Conduct Authority’s (FCA) focus on vulnerable customers and requirements for firms to demonstrate what protocols are in place. Rightly so. But shouldn’t anyone seeking financial advice be considered vulnerable, by virtue of the fact that they need advice?
According to Royal London’s guide for identifying and supporting vulnerable customers, 47% of customers fall into the ‘vulnerable’ category. If you consider the FCA’s definition of vulnerability and the list of characteristics to help identify a vulnerable customer, it’s not difficult to see why:
"A vulnerable customer is someone who, owing to their personal circumstances, is particularly susceptible to harm, especially when a firm or business isn’t acting with appropriate care."
…isn’t that everyone?
The regulator has suggested advisers look out for low capability (not knowing very much about financial products), low resilience (unable to withstand a financial setback very well), negative life events, physical or mental health conditions, and factors such as loneliness or isolation.
Whilst some customers are more obviously vulnerable - the elderly, those with disabilities, and those for whom English isn’t their first language – I would contend that everyone is vulnerable by the FCA’s definition, at least some of the time.
"Rather than trying to work out whether your customer is vulnerable, why don’t we assume that all customers are vulnerable and support them according to the FCA’s guidelines?"
The FCA has said that vulnerable customers should be dealt with in such a way that prevents harm, ensures fair treatment, complies with regulation, and builds trust and loyalty.
Shouldn’t everyone expect this level of customer service?
Let’s go back to the FCA to find out what it considers to be the behaviour of advisers more likely to lead to good outcomes for vulnerable customers. A firm needs to:
- Understand the needs of their target market/customer base,
- Make sure staff have the right skills and capability to recognise and respond to the needs of [vulnerable] customers,
- Respond to customer needs throughout product design, flexible customer service provision and communications,
- Monitor and assess whether advisers are meeting and responding to the needs of customers [with characteristics of vulnerability] and make improvements where this isn’t happening.
Are the bits in brackets necessary?
In March, the FCA stated that, "We want vulnerable customers to experience outcomes as good as those for other consumers." Perhaps this message should read, "We want consumers to experience outcomes as good as those for vulnerable customers."
