TECHNICAL TALK
CONSUMER DUTY BRINGS VULNERABLE CLIENTS BACK TO THE SPOTLIGHT
Mark Greenwood Director of Compliance Services SimplyBiz
The regulator ’ s finalised guidance on the fair treatment of vulnerable customers was published by the FCA on 23 February 2021 . Later in 2021 , the FCA published ‘ A New Consumer Duty ’ ( Consultation Paper CP21 / 13 ), in which the fair treatment of vulnerable clients was woven throughout the entire document . Both of these regulatory publications give an insight into the regulator ’ s mindset and approach for firms to ensure the fair treatment of vulnerable customers . What is crystal clear from both regulatory publications is that the way the FCA will supervise the treatment of vulnerable customers will be integrated into their supervision , and this is most definitely not a one-off supervisory exercise . For anyone reading this article that is not familiar with the FCA finalised guidance , I would encourage them to read this paper and benchmark their systems , controls and processes against the examples of good and poor practice throughout the paper . The regulator expects firms to improve the skills and capability of their staff in a way that is proportionate , and gives an example in their finalised guidance where a smaller firm may choose to share existing materials on vulnerabilities with their staff , such as those from professional bodies and trade associations , or charity and consumer organisation websites . The guidance also contains some practical examples for firms , and gives an example of a customer with a sum of money to invest as a result of a negative life event , such as a life insurance payout or compensation for a life-changing accident . It highlights that this client may need more time and help to consider all the information and their options to ensure they reach a conclusion which is best for them in the long term . We all know that the fair treatment of vulnerable customers is not a tick-box exercise , and in this article , we explore more practical ways firms and advisers can deal with vulnerable customers .
When we look at practical ways firms and advisers can deal with vulnerable customers , I feel a good starting point is understanding the different types of vulnerability . Whilst it is very difficult to create an exhaustive list , here are some of the factors that could help you identify potential vulnerability :
• Age
• People in care
• Poor health
• Mental health issues
• Learning difficulties
• Physical disabilities
• Being a carer
• Low literacy
• Language barriers
• Low income
• Living conditions
• Cultural barriers
• Poor communication skills
• Subject of abuse
I think it is worth reiterating that displaying a characteristic does not automatically mean an individual is vulnerable . Once a vulnerability has been identified and understood , your firm may deem that specialist support , which is not within your own capabilities , expertise or resources , is necessary . At that point , your firm can cease to act on behalf of the customer and may wish to refer them on to a suitably qualified and experienced firm . A firm may take this decision if it believes it cannot act in the client ’ s best interests . If you have identified a vulnerability , the next step is to consider how it is recorded and what , if any , changes you make to your sales or service processes and outcome . When dealing with the client there are a number of academic theories that are widely used when dealing with certain types
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