The Vulnerability Review: A reflection on the FCA findings and addressing the elephant in the room

You may be aware that The FCA recently released several new reports (and hosted a supporting webinar), all of which with the aim of reviewing firms’ treatment of customers in vulnerable circumstances. Within these outputs the regulator shared some good and poor practice examples to further help firms provide the right care for their customers in line with Consumer Duty and looked ahead to what firms needed to do next.

Whilst the regulator praised firms overall for their work to address the needs of vulnerable customers, it also recognised that there was still some room for improvement. It also alluded to sanctions if firms fail to act, with the FCA director of consumer finance, Alison Walters, stating: "But of course, as you would expect, when we see poor outcomes, persistent poor outcomes, we can take robust action and we will.”

So, what were our takeaways from the FCA outputs?

After reading the supporting communications, and especially after the webinar hosted by the FCA, it still felt that there was an elephant in the room..

…DATA, or rather, lack of it! And perhaps a misguided emphasis on the consumer.

Let’s first look at the headline data presented in the FCA consumer research. Specifically, how just 4 in 10 vulnerable customers say they have disclosed their needs to their financial services provider. We would argue here at Comentis that this data is far from what’s reflected in reality. Our data, in fact, (from 175,000 real time assessments) shows the figure of disclosure to be much lower indeed. In short, very, very rarely do people self-report.

And that’s not really all too surprising…. because the thing is, not only is there unfortunately a real stigma and sense of shame surrounding the prospect of being vulnerable, but it’s also entirely possible that the customer themselves might not even be aware that they’re at risk from a vulnerability in the first place. As such relying on customers to be open about a potential vulnerability (i.e., self-reporting) simply won’t work as a means to identify vulnerability.

What surprised us was the regulator putting the onus on the customer to self-report their vulnerability status. Rather we believe that the emphasis should be on the firms themselves to ensure good outcomes for their customers. And this means they need to get identification right up front - and have a systematic and robust process for doing so. 

So much of the conversation during the FCA webinar focused on processes, training, and good outcomes (all of which are noteworthy), but let’s be realistic, none of this means anything if the firm doesn’t get the identification right up front. And to do this they need data. Good, quality data.

The regulator says: “Good practice:  [only] A small number of firms used data effectively to identify where customers in vulnerable circumstances were experiencing worse outcomes than others. “

Access to good data – and using it correctly to identify vulnerable customers - is therefore a key area for improvement area for firms.  

At least three of the webinar panel members bought up the issue of data without prompting, stating things like ‘we need more certain data’, and ‘we need better data collecting’. And we couldn’t agree more – because without it firms cannot identify vulnerable customers and subsequently cannot ensure good outcomes.

Of course, none of this is simple. We are all too aware of this.

What firms need is a is a means to systematically identify all signs of vulnerability for each and every client, combining clinical expertise with quality data though an online assessment. And that’s where we come in. To help organisations meet this complex challenge, we provide a cost effective and efficient online assessment platform allowing you to consistently and objectively identify and support those at risk of financial vulnerability as well as report on this with good quality data that will satisfy the regulator and ensure good outcomes for your customers.

Whilst data and identification may have been the elephant in the room during the FCA webinar – we can ensure it is front and centre of everything you do here at Comentis.

Further reading:

·       FCA review Firms' treatment of customers in vulnerable circumstances.

·       FCA’s good practice and areas for improvement Delivering good outcomes for customers in vulnerable circumstances.

·       FCA’s consumer research