By understanding the potential harm that customers may be susceptible to, Financial Planners can ensure that clients in vulnerable circumstances receive the same fair treatment and outcomes as other clients.
Anyone can be at risk of not making the best, or most appropriate decision for their particular needs, due to them not having the agency or capacity to do so at that time.
Those in vulnerable circumstances may be more likely to be easily influenced, or to accept advice without fully considering the suitability of the advice for their specific situation.
In this guide, we will aim to explore what vulnerability is and what practical steps you can take as a Financial Planner, to ensure that you are supporting your clients and their family effectively and appropriately.
WHAT IS VULERNABILITY
The FCA defines a vulnerable client as someone who, due to their personal circumstances, is especially susceptible to harm.
This could be anyone who may be less able than others to:
- Realistically and objectively identify and prioritise their own needs.
- Fully understand the risk, cost or implications of any advice provided.
- Assess information in the usual format, for example, orally during meetings or visually in respect of written advice.
The FCA’s Financial Lives survey, conducted on a yearly basis since 2017, shows that in February 2020, 46% of UK adults displayed one or more characteristics of being potentially vulnerable.
This risk of becoming vulnerable may be increased, by having certain key characteristics including, but not limited to:
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Poor physical or mental health.
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Experiencing negative life events, such as bereavement or divorce.
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Low financial resilience.
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Low cognitive capability, such as poor literacy or numeracy skills.
Having one or more of such characteristics does not mean that they will suffer harm, but it may limit their ability to make reasonable or rational decisions and can put them at greater risk of accepting the wrong advice.
Other factors increasing a person’s vulnerability may include:
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Poor concentration and difficulty in making decisions.
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Difficulty in accessing services.
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Inabilities to manage finances.
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Being a previous victim of financial abuse.
Your goal is to provide your client with appropriate support, while delivering the same excellent service you do for all your clients.
By understanding the nature and scale of characteristics of vulnerability, a good Financial Planner will be able to identify the potential disadvantages and types of harm these clients may be vulnerable to and should be able to obtain relevant information in an appropriate and sensitive way.
IDENTIFYING VULNERABILITY
Throughout most people’s lives, we have to deal with a range of life changing circumstances. In some cases they are expected, such as buying your first house or car, but in many cases they are unexpected and difficult, such as a sudden bereavement or relationship breakdown.
Unexpected or negative life circumstances can increase vulnerability risk, meaning that every person is at risk of becoming vulnerable during their lifetime.
Levels of vulnerability can change and heightened periods of vulnerability can be short-term, such as a hospital stay, or long-term, like the resulting experience from a mental-health diagnosis.
Vulnerability is therefore not as simple as classifying someone as ‘vulnerable’ or ‘not vulnerable’ and should instead be considered as a spectrum where risk fluctuates.
HAVING SKILLED AND CAPABLE STAFF
The whole workforce should be educated on vulnerability and should understand how their role could affect the fair treatment of clients.
Staff should also have the necessary skills and training to identify and respond to vulnerability and be offered support within the workforce.
Frontline work staff should have the necessary skills and capability to recognise and respond to the characteristics of vulnerability.
Clients should have the option of having someone they trust to attend meetings with them, and their adviser should be experienced in dealing with similarly vulnerable clients.
TAKING PRACTICAL ACTION
An ethical Financial Planner will do everything in their power to support vulnerable customers, to ensure that their needs are met, through practical action within their firm.
It is important that you make your clients aware of the support available to them, including the relevant signposting to agencies, such as the Citizens Advice Bureau.
Customer service should respond flexibly, and systems and processes should be in place to support vulnerability. How vulnerable customers are communicated with should be considered.
Understanding what you need to do, to adapt your method of working can vary. For example, it might be a seemingly small accommodation, such as increasing the font size on documents or using coloured paper instead of black on white, where your customer has a condition that affects eyesight.
Your digital documentation could have versions that include obvious visual cues, which will help paint the picture of your services more clearly.
Where clients are uncomfortable using computers and electronic devices in their entirety, it is important that they can be communicated with in a different way.
Avoid using acronyms and jargon. Remember, even if your client isn’t vulnerable, the majority of your clients will not have industry knowledge. Writing in acronyms and using industry jargon can be confusing to the client and they may not feel able to speak up if they don’t understand something.
If a meeting is being held face-to-face, consider the needs of your clients. Does your client use a wheelchair? Are they visually impaired and would they benefit from a room closer to the entrance? There are a range of physical factors that need to be considered.
MONITORING AND ASSESSING
Financial Planners should monitor and evaluate how they deal with vulnerable clients, to assess where and how improvements can be made. Client files should be reviewed to ensure they were treated fairly and to check for any errors. Feedback should be sought to see if there are any positive improvements that can be made and any complaints should be analysed fully to determine their root cause.
Every financial advisory firm has a duty of care to protect their vulnerable clients and recognise the importance of dealing with them appropriately, fairly and consistently.
They should have a well-considered approach to recognising and dealing with vulnerability, that can be shared with vulnerable clients or, with those who are concerned about their wellbeing.
