Treating Vulnerable Clients Fairly
Published / Last Updated on 16/03/2021
The Financial Conduct Authority published its ‘Guidance for firms on the fair treatment of vulnerable customers’ on 23rd February 2021.
As financial advisers we were already acutely aware of and assessing clients on whether we deem them to be vulnerable or not and take appropriate action. For example some clients do not like filling out forms, other clients may not read that well, other clients may be under stress due to other matters in their life, other clients may be colour, letter or number ‘blind’ and where appropriate we take action to try and make our dealings with you as easy and understandable as we can.
This has now been expanded by the FCA to offer a full guide on what financial firms should have in place including written client procedures on the same that are regularly reviewed. To start with, we must look at the FCA definition of what a vulnerable client is:
“someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate level of care”.
All clients are at risk and as financial advisers, we consider vulnerability across a broad spectrum of risks now guided by the FCA. We assess and note that many clients may not be vulnerable but extra care is required to support clients in vulnerable circumstances thus reducing the financial risk or harm for any vulnerability.
There are four key drivers to Treating Vulnerable Clients Fairly as follows:
- Health
- Life Events
- Resilience
- Capability
These are broken down, by way of example as follows:
|
Health |
Life Events |
Resilience |
Capability |
|
conditions or illnesses that affect your ability to carry out day-to-day tasks |
such as bereavement, job loss or relationship breakdown |
is where there is a low ability to withstand financial or emotional shocks |
is where there is low knowledge of financial matters or low confidence in managing money (financial capability) and low capability in other relevant areas such as literacy or digital skills |
|
Examples: |
|
|
|
|
Physical ability |
Retirement |
Inadequate income (outgoings exceed income) or erratic income |
Low knowledge or confidence in managing finances |
|
Severe or long-term illness |
Bereavement |
Over-indebtedness |
Poor literacy or numeracy skills |
|
Hearing or visual impairment |
Income shock |
Low savings |
Poor English language skills |
|
Mental health condition or disability |
Relationship breakdown |
Low emotional resilience |
Poor or non-existent digital skills |
|
Addiction |
Domestic abuse (including economic control) |
Leaning difficulties |
|
|
Low mental capacity or cognitive impairment |
Caring responsibilities |
No or low access to help or support |
|
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Other circumstances that affect people's experience of financial services e.g. leaving care, migration or seeking asylum, human trafficking or modern slavery, convictions |
We directly and/or indirectly assess each client’s individual needs, any potential vulnerability and take appropriate action in our dealings with you whether that is in our telephone or video conference calls, face to face meetings, written fees, reports and advice implementation to ensure no actions are taken until both you and us are 100% satisfied that our advice is suitable for you, not just for financial products, funds or taxes but also in terms of any underlying vulnerability. Our staff are also, were appropriate, trained on the same depending upon their role and interaction with you.
