Vulnerable Clients – How to deal with them – Understanding
22nd August 2022
The major reason why clients get good outcomes is UNDERSTANDING.
The new Consumer Duty principles are being introduced to try to maximise the potential for advisers to provide good outcomes for consumers.
The major reason why clients get good outcomes is UNDERSTANDING.
The adviser needs to understand:
- The client
- Client objectives
- What solutions will enable the client to achieve their objectives.
- The products that will provide the solutions
- The pros and cons of the chosen products against alternatives
The client needs to understand:
- Their current circumstances
- Their priorities when setting objectives.
- How achievable their objectives are
- The solutions suggested by the advisers
- How the solutions will work – end result, rather than too much detail “under the bonnet”.
- The pros and cons of the solution
- Likelihood of achieving objectives.
- What the advisers will do for them
- Fact finding
- Research
- Presentation of solutions
- Implementation of plans.
- Costs involved in set up and ongoing
- Regular reviews to confirm progress of plans against any changes in circumstances and objectives
These lists are not exhaustive. As can be seen, the list for clients is far longer than for the advisers.
This puts the onus on advisers to ensure that clients understand.
The onus is on advisers to ensure that clients understand
The benefits of advisers ensuring the understanding of clients include:
- Reduction in complaints
- Greater client satisfaction
- Engagement from a particular client set
- Reputational benefits
- Good publicity
- Improvement of overall “culture”
The barriers to understanding tend to fall under the traditionally used to describe vulnerable clients. Although, it may also be due to advisers not ensuring understanding or being able to ensure that clients understand.
Responsibilities of the advisers:
- To be familiar with this policy and procedures, and be able to recognise where additional support or sign-posting to other agencies may be required
- To take appropriate action
- To report any instance where they believe that a client might be in a vulnerable circumstance, and act accordingly.
Client evaluation
All clients will be assessed, as a minimum, against the following criteria. This is in addition to any processes we have in place for different vulnerability groups;
O U R
C L I E N T S
B E S T
I N T E R E S T S
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Assess the client against our vulnerability policy |
Actively seek to encourage disclosure about potential vulnerability | |
Ensure the approach taken is accurately reflected in the business records | |
Consider whether to discuss the approach with colleagues/other professionals | |
Ensure the know your client information gathers sufficient details to support the advice and uses additional questioning where appropriate | |
Consider any unusual aspects – e.g. if someone else is accompanying a client, is there the potential for undue influence from that person | |
Understand who the client is and the extent of the instructions needed to act on e.g. Power of Attorney | |
Consider whether the client is acting differently/showing signs of a change of character | |
Set a list of questions to check client memory recollection, where appropriate | |
When working with more than one person, is there the potential for any conflict of interest or undue influence | |
Confirm any change in circumstances which might lead to vulnerability e.g. taking on caring responsibilities | |
Establish whether the client’s stated needs and objectives align with their current circumstances | |
Consider whether the standard sales process or specific vulnerability group process is appropriate to the client’s needs | |
Identify products/solutions that are clear and easy to understand for those showing signs of vulnerability | |
Consider whether there is a need to adjust the delivery and format of communications e.g. providing a report in large print | |
Explain all matters with no or limited use of jargon | |
Try to accommodate flexibility around appointment locations and times e.g. visiting the client at their home at their preferred time of the day | |
Try to determine if the duration of the meeting will need extending to accommodate more detailed explanations and delivery of information | |
Determine if the complexity of the advice will require delivery over a greater number of meetings | |
Considered the accessibility of office visits for those with health conditions/disabilities |
The FCA definition of vulnerability refers to customers who, due to their personal circumstances, are especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.
• Health – health conditions or illnesses that affect ability to carry out day-to-day tasks.
• Life events – life events such as bereavement, job loss or relationship breakdown.
• Resilience – low ability to withstand financial or emotional shocks.
• Capability – low knowledge of financial matters or low confidence in managing money (financial capability). Low capability in other relevant areas such as literacy, or digital skills.
Characteristics associated with the 4 drivers of vulnerability
Health |
Life events |
Resilience |
Capability |
Physical disability |
Retirement |
Inadequate (outgoings exceed income) or erratic income |
Low knowledge or confidence in managing finances |
Severe or long-term illness |
Bereavement |
Over- indebtedness |
Poor literacy or numeracy skills |
Hearing or visual impairment |
Income Shock |
Low savings |
Poor English language skills |
Mental health condition or disability |
Relationship Breakdown |
Low emotional resilience |
Poor or non-existent digital skills |
Addiction |
Domestic abuse (including economic control) |
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Learning difficulties |
Low mental capacity or cognitive disability |
Caring responsibilities |
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No or low access to help or support |
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Other circumstances that affect people’s experience of financial services eg, leaving care, migration or seeking asylum, human trafficking or modern slavery, convictions |
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• 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 they are meeting and responding to the needs of customers with characteristics of vulnerability, and make improvements where this is not happening