HOW TO SPOT VULNERABILITY

Although we’re still awaiting the results of the FCA’s research into vulnerability, it is a topic that is never far from the headlines.

In fact, it has been an area of focus for the regulator for the best part of 10 years and it is still relatively unimpressed with the way firms support vulnerable clients.

Vulnerability featured heavily in the Consumer Duty final guidance, but no new regulation has been introduced. However, with customer outcomes now so high up the priority list, it is safe to say poor practise could well lead to enforcement action.

So, how do you identify if a client has vulnerabilities and assess what support they require?

What is vulnerability?

People with vulnerabilities don’t come with a ‘handle with care’ label. In fact, they might not even recognise they are vulnerable themselves.

Regardless of their own perceptions, you have a duty to identify and protect a vulnerable client and importantly, demonstrate that you are treating them fairly.

The FCA defines a vulnerability as: “Someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”

Being defined as vulnerable does not necessarily means that a person will suffer as a result of your advice. There are many characteristics and it can come in a range of guises. It is important to remember it is a fluid state and can be temporary, sporadic or permanent.

Whilst no means comprehensive, the following list gives you some of the warning signs:

• Low literacy, numeracy and financial capability skills
• Physical disability
• Severe or long-term illness
• Mental health problems, including common mental health disorders
• Low income and/or debt
• Caring responsibilities, including acting on the instructions of a Power of Attorney
• Being ‘older,’ for example, more than 80, although this is not absolute. It may be associated with cognitive or dexterity impairment, sensory impairments such as hearing or sight loss, the onset of ill health or not being comfortable with new technology
• Being young and potentially less experienced
• Changes in circumstances, for example, redundancy, bereavement or divorce
• Lack of English language skills
• Non-standard requirements or credit history. For example, armed forces personnel returning from abroad, ex-offenders, care-home leavers and recent immigrants

Remember, no personal circumstances are the same and vulnerable clients should always be treated as individuals.

Standardise your processes

Knowing the characteristics of vulnerability isn’t enough. You must ensure your firm has a strategy in place to deal with these clients, that all relevant staff are aware of it and they have received the appropriate training. This strategy should be evaluated on an ongoing basis and reviewed periodically.

Although frontline staff don’t need to be experts on vulnerability, they are crucial to a client’s experience, so some level of expertise is beneficial and they should know who to turn to for assistance.

Advisers, however, are expected to be able to spot and respond to vulnerability, whilst having the freedom to handle each case as you see fit. This can be achieved through training and if you don’t feel you have the knowledge currently, it is perhaps an area to focus on during your CPD.

A lot of the information you need to assess vulnerability is a standard part of the advice process. When collecting and recording this data, you need to consider how it could impact on the client’s ability to interact with you and therefore, what action you need to take to ensure good outcomes.

We recommend taking time to review how your firm deals with vulnerability. If you don’t have policies and procedures in place, we’re happy to help implement these and discuss your options. For more information, don’t hesitate to contact us on (0161) 521 8641 or email: info@b-compliant.co.uk