The issue of #vulnerablecustomers has been increasingly on the radar of firms that fall under the watchful eye of the Financial Conduct Authority (FCA). With the deadline of July 31 2023 fast approaching, more and more professionals are thinking about what the guidance from the FCA actually means and how best to ensure they remain within the scope of the regulation.
As you would expect, there is an increasing amount of literature being published to assist professionals with this, however, not all of it is as helpful as it first seems.
So, here are my top 5 myth busters to help professionals navigate the guidance.
A vulnerable circumstance is not the same as being vulnerable
The FCA identified 4 groups of drivers, triggers or circumstances that may result in a consumer experiencing a vulnerability. They classified these as life events, health events, capability and resilience.
A trap that professionals often fall into is conflating the existence of one of these with the existence of a vulnerability. The reality is that it’s possible to be experiencing a ‘life event’ such as moving home, and yet not be vulnerable. It is not the circumstance that creates the vulnerability, rather our response to it. It is our emotional, psychological and mental response or the ‘driver’ as it is this that determines whether an individual becomes vulnerable. Just because someone is bereaved does not mean they are necessary vulnerable.
Communication is not the same as Understanding
In their publication, 'A new Consumer Duty', the FCA identified four outcomes – a third of which is entitled ‘Consumer Understanding’. A lot of the current literature regarding this outcome focusses on communication and appears to propose the view that, ‘If I tell my customer something enough times, in enough different ways, it means they have understood it”. Unfortunately, this could not be further from the truth.
Communication and understanding are not the same. Communication is the process of conveying information, understanding on the other hand is an ongoing cognitive activity of acquiring, integrating and expressing knowledge according to the task or situation at hand. Just because I tell you something clearly and in simple language, does not mean you necessarily understand it.
The only type of resilience that matters is financial resilience
This is something that I hear a lot. The reality is that resilience in its entirety is hugely important when it comes to identifying and supporting vulnerable customers. Resilience is a psychological concept that determines how we as individuals are going to respond when times get tough and understanding your customers resilience is key if you are to identify when and how to support them appropriately.
Having a lot of money in the bank does not stop people experiencing poor mental or physical health, and it does not stop the world giving you a hard time. Yes, it can sometimes help to soften the impact, but millionaires still suffer with poor mental health, commit suicide, default on payments, become bankrupt etc. Understanding your client’s resilience as a whole is key to ensuring good outcomes for them.
Age is not an automatic qualifier for vulnerability status
This very much links back to the first myth, but I have separated it out here because so many firms seem to have policy that states when a certain age is reached the customer is to be classed as vulnerable.
The reality is, it’s not age that is the issue – it’s what we associate with it that people are concerned about. Are they able to recall the salient information? Can they concentrate for long enough? Can they process what they are being told? Let’s face it, we all know people over 80 that would put most of us to shame, whilst there are some people in their 40’s that give us real cause for concern. Age is not the issue – it’s the decline in cognitive functioning that most people are concerned about and this can happen at any age.
It’s too difficult and expensive
Undoubtedly, the FCA have set all those it regulates a huge challenge and to expect all professionals to become skilled clinicians that can identify and support vulnerable customers without help is clearly nonsensical.
Thankfully, as professionals, we don’t live and operate in isolation and there are assessment tools, such as the one we have created at Comentis, that are there to help. By utilising such cost effective, easy to integrate and use solutions, you can ensure you meet the necessary regulatory requirements as outlined by the FCA.
Tim Farmer, Clincial Lead, Comentis