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;

 

 

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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.

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. Firms should think about vulnerability as a spectrum of risk. All customers are at risk of becoming vulnerable and this risk is increased by characteristics of vulnerability related to 4 key drivers.
• 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)

 

Learning difficulties

Low mental capacity or cognitive disability

Caring responsibilities

 

No or low access to help or support

 

Other circumstances that affect people’s experience of financial services eg, leaving care, migration or seeking asylum, human trafficking or modern slavery, convictions

 

 

To achieve good outcomes for vulnerable customers, firms should take action 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 they are meeting and responding to the needs of customers with characteristics of vulnerability, and make improvements where this is not happening

Good outcomes for clients.