It has been four years since the Financial Conduct Authority announced its intention to pursue what it called “an active agenda” around the issue of consumer vulnerability, placing it firmly on the boardroom table of all financial services businesses.
Occasional Paper No 8: Consumer Vulnerability pulled no punches, stating that the regulator found “problems at every stage, from high level policy, through system design, to the products that are available and ways that staff implement policies and sell products”.
While it admitted there were no quick fixes, the FCA made clear that firms would be expected to take up the challenge, writes Stephen Lowe, group communications director at retirement specialists Just Group.
Four years on and intermediary firms are on the case with nearly all (94%) stating they are treating the issue seriously.
This was according to research carried out for the Retirement Leaders Annual Summit hosted by Just Group earlier this year, which focused on how the industry was responding to the challenge so far.
A comprehensive strategy has many facets but must include training front line staff to understand vulnerability and to identify and support vulnerable customers.
Advisers will increasingly be obliged to record and provide evidence of training, through qualifications and CPD such as Just Group’s recently launched Older and Vulnerable Consumer Care training tool.
Developed with the Society of Later Life Advisers (Solla), which has spent more than a decade improving professional standards and promoting technical excellence, the tool is an intuitive, interactive entry point for advisers to a broad and complex subject.
This kind of vulnerability training highlights three key questions facing firms today:
What constitutes vulnerability in older people?
One of the FCA’s concerns was that much consumer protection regulation is underpinned by the notion of how the average customers might behave, but that vulnerable consumers may be significantly more likely to make poor financial decisions.
Vulnerability can take on different forms and occur at any age although the longer we live the more likely we are to experience it.
It can be temporary, permanent or sporadic and can, for example, be caused by injury, illness, cognitive decline, job loss, lack of financial resilience, bereavement, relationship breakdown, loneliness, and more.
The FCA definition of a vulnerable consumer is someone who “due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”.
That is a clear signal that advisers have a responsibility to ensure extra care and support is in place and that vulnerable clients are treated fairly.
The regulator did not mince its words, warning: “We will take any exploitation of vulnerable customers very seriously, including using the toughest enforcement action open to us.”
How do advisers identify when an older person may be vulnerable?
When interacting with clients, advisers need to tune into signals of vulnerability from conversations such as “I’ve just come out of hospital after a fall”, “I can’t cope caring for my wife” or “my son/daughter insists I sell up to live with them”.
Other signs may include breaking with past patterns of behaviour, repeating the same question, sounding stressed or under duress, or a third party doing all the talking.
Older people may be more unwilling to disclose anything they feel “may go against them” and be embarrassed or afraid of admitting to being scammed.
Offering support and extra care to older customers often falls within legal and regulatory requirements and is at the heart of good business practice.
How can firms adapt working practices to ensure vulnerable people receive extra care and support when needed?
Advisers need to be clear about important protections that already exist, including powers of attorney, the Mental Capacity Act, the role of the Court of Protection and Office of the Public Guardian (in England and Wales), confidentiality, record keeping and data protection.
Advisers have an important role looking out for evidence of scams or clients acting under duress. Offering extra care and support can also mean collaborating with external bodies such as charities and other third-party organisations.
A challenge for advisers could be communicating or providing information to vulnerable or older customers whether face-to-face, by phone, on paper or digitally.
Options can range from simple steps such as avoiding jargon, using larger fonts and follow-up calls, to more in-depth solutions such as offering braille or interpretation services.
A key principle is to establish and ensure the consumer’s communication processes and preferences are ranked above those of the firm.
Advisers can also focus on improving their ‘soft skills’ such as their listening abilities, empathy and reading of body language.
Areas to focus on include using plain language, encouraging questions, avoiding over-simplifying issues and checking anything the client appears unsure about.
Finding out more
The increasing scrutiny by the FCA on the vulnerability issue is leading to a wider body of information and help.
Among these, Solla is a leading source of information and training for both vulnerability and the broader issue of later life advice.
The Association of British Insurers has a vulnerability guide setting out numerous case studies and examples of good practice. Dementia Friends is an initiative by the Alzheimer’s Society to raise awareness and support in communities.
This article was written for International Adviser by Stephen Lowe, group communications director at Just Group.