Vulnerability – Do you know how to spot it?

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1 October 2019

Vulnerability has been an area of focus for FCA since their occasional paper 8 back in 2015, increasing so in recent times. Following their consultation on the Fair Treatment of Vulnerable Customers (CG19/3) in July, the FCA is keen to assess how firms demonstrate they are doing the right thing for vulnerable customers and that this is deeply embedded in a firm’s culture. As part of this we understand the FCA has invited regulated firms from across the industry to take part in information gathering exercise asking questions around what this means for their business and customers, and how are they addressing the needs of vulnerable customers. Whether your firm has been invited or not should be irrelevant as the FCA has clear expectations that firms are continuing to evolve processes to identify and best serve vulnerable clients. The aim of this blog is to provoke thought as to how your business assesses and supports those with vulnerabilities.

What is Vulnerability?

Does your firm know how to identify someone with a vulnerability?  Most vulnerabilities aren’t physical in appearance, and it is your duty of care as a firm to have the measures in place to help you as the adviser, to identify a vulnerable consumer.  And it is of the utmost importance that you can demonstrate that you are treating vulnerable customers fairly.

In June 2018 the FCA provided a report that analysed survey results for the financial lives of consumers across the UK.  The survey itself was completed between December 2016 and April 2017 with nearly 13,000 consumers interviewed.  And the findings were certainly eye-opening.

Looking at UK adults aged 65 and over, 60% show characteristics of potential vulnerability.  Some of the key facts that were identified for this demographic were:

  • 35% never use the internet. And for those that do, it was noted that they are the least likely to check if an internet site is secure before giving their bank or credit card details.
  • They are most likely to be long-standing customers. g. two-fifths of those 65 and over have held their home insurance with the same provider for 10 years or more.
  • It also found that after the age of 85, they saw a step-change in how confident people feel about their finances – 31% aged 85 and over have low confidence in managing their money.
  • On average, the best estimate for the UK is that between 1 and 2 per cent of people aged 65 or over in the United Kingdom today have suffered (or are currently suffering) financial abuse since turning 65.


The FCA defines a vulnerable consumer 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 potentially vulnerable does not mean someone will necessarily suffer harm; there are many characteristics.  Whilst the following list is not comprehensive, it is a good starting point:

  • Low literacy, numeracy and financial capability skills
  • Physical disability
  • Severe or long-term illness
  • Mental health problems including common mental disorders (CMD)
  • Low income and/or debt
  • Caring responsibilities (including operating power of attorney)
  • Being ‘older old’ for example, over 80, although this is not absolute (may be associated with cognitive or dexterity impairment, sensory impairments such as hearing or sight, the onset of ill-health, not being comfortable with new technology)
  • Being young (associated with less experience)
  • Change in circumstances (e.g. redundancy, bereavement, divorce)
  • Lack of English language skills
  • Non-standard requirements or credit history (e.g. armed forces personnel returning from abroad, ex-offenders, care-home leavers, recent immigrants).

To quote the FCA in their Occasional paper 8:

‘’ Vulnerability can come in a range of guises, and can be temporary, sporadic or permanent in nature. It is a fluid state that needs a flexible, tailored response from firms. Many people in vulnerable situations would not diagnose themselves as ‘vulnerable’. The clear message from the research carried out for this paper is that we can all become vulnerable’’

Knowing only the characteristics of vulnerability isn’t enough, however.  You must also ensure as a firm that you have a strategy in place and that all relevant staff are fully aware and have received the necessary training to implement it.  Performance for the strategy should be evaluated on an ongoing basis and the strategy itself should be reviewed periodically.

Vulnerable consumers should always be treated as individuals, as not everyone’s circumstances are the same. As an adviser, you are expected to spot and respond to vulnerability whilst having enough freedom to handle each individual case as you deem necessary, this can be achieved through knowledge and training.

Frontline staff for a firm don’t need to be experts on vulnerability, but they are crucial to the consumer’s experience.  They need to be able to hold a proper conversation and also know where to turn to for internal expertise.

If you’re a firm that doesn’t have a vulnerable client policy in place but is aware of the importance of having one; b-compliant are here to help.  Get in touch today to discuss your options with us.

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