This month the Financial Conduct Authority (“FCA”) have issued a guidance consultation on vulnerable customers, ‘Vulnerable Customers – Finalised Guidance FG21/1’. Ensuring the protection of customers, particularly those who are vulnerable, has always been a key focus of the FCA, however its importance is heightened now more than ever due to the impact of the Coronavirus pandemic.
The Financial Lives survey conducted by the FCA showed that 46% of UK adults displayed one or more characteristic of vulnerability by February 2020. The FCA seek to provide further clarity for firms on how to identify and treat vulnerable customers to ensure they receive fair outcomes.
To understand how to support vulnerable customers, firms must first understand the characteristics which could be an indicator of vulnerability. The FCA have set out 4 potential driver categories of customer vulnerability, to remind firms of its wide-reaching nature.
Within the guidance, the FCA highlights the importance of learning from front-line staff who are more likely to encounter vulnerable customers on a day-to-day basis. All staff must understand how their role could impact a vulnerable customer, in addition to having the capability and skills to identify and adapt appropriately. Staff should also be offered emotional support, flexibility, and practical guidance to ensure they are properly equipped to treat such customers fairly.
Nevertheless, senior managers are called to create of culture where vulnerable customers are at the forefront when developing products, services, and communications. When communicating with vulnerable customers, firms should objectivity consider whether their communications are clear, understandable and use multiple channels where possible. Firms must review their customer journey with a ‘vulnerable customer lens’ to understand the potential harm which could be caused when obtaining financial products or services, taking into account their target market and customer base.
The FCA reminds firms of the importance of having systems and processes in place which enable customers to disclose their needs. Service teams should be able to record and retrieve information about customer’s circumstances and tailored requirements effectively. However, the FCA advise firms to ensure they have proper consent to record such information and remember that customers may not want the label ‘vulnerable’ being applied to them during their engagement.
The FCA state that instead of focusing on labelling vulnerable customers, firms should review the potential harm and implement practical steps within their business to reduce this harm. This could include informing the customer of relevant options such as third-party representation or specialist support services. Senior managers should review their monitoring arrangements to assess whether they are meeting the needs of vulnerable customers and take action where required. Management information should also be produced and regularly reviewed, for ongoing oversight.
The FCA asks firms to embed a culture where the fair treatment of vulnerable customers is at the forefront. This guidance calls for firms to go beyond front-line communications, reviewing their products, services and procedures to reduce the prevalent harm within financial services.
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