Some firms have failed to think about vulnerability proactively and need to act, according to Graeme Reynolds, director of consumers and competition at the FCA.
Speaking at the Pimfa Customer Vulnerability summit today (October 24), Reynolds discussed how the wealth sector appeared to be an outlier in identifying vulnerable clients.
He said: “A quarter of portfolio managers and half of our stockbroking firms reported they still have no clients in vulnerable circumstances at all. That sits in contrast to our financial lives survey data and put together, the data shows the wealth sector remains a clear outlier given those aspects of vulnerability.
“Is there any reason why the wealth sector should be this much different to every other sector? Why wouldn't bereavement and ill health, for example, be a relevant factor for a material proportion of clients?”
Reynolds pointed out that even if firms didn’t directly deal with clients, if they were part of the distribution chain they needed to “act”.
Positive initiatives
Reynolds added: “Our 2023 Wealth Survey led to significant supervisory work to understand the results. We've been testing firms' understanding of those key aspects of the consumer duty, client needs and monitoring, training, skills and capability of staff, product and service, design and communications and client service. And we wanted to assess whether these support good outcomes for clients in vulnerable circumstances.
“Now I'm pleased to say we've seen some really positive initiatives in our supervisory and wider policy review work, for example, in identification of vulnerability.
"We've seen some firms adopt a tell us once approach to minimise the number of times a customer must inform them about their vulnerability, such as in the case of a bereavement, and we've seen other firms developing systems or working with CRM providers to record a wider range of vulnerability characteristics.
“In one firm we recently visited, this was well demonstrated by their system having detailed drop down vulnerability characteristic options that could be selected with client support, that could then be matched to them and in understanding client needs and support,” he revealed.
Reynolds said it was a “good start” to see all of these initiatives but that the FCA also had “some concerns”.
He explained: “It won't surprise you to hear me say that we've seen some firms who have failed to think about vulnerability proactively.
"For example, one wealth management firm considered its clients were the IFAs it was contracted with, the firm could not articulate who was in their target market. It could not identify any characteristics of the needs of its own clients, and therefore hadn't considered any action to meet those needs.
“We also had to act when we found a wealth firm’s policy prohibiting the onboarding of clients with a range of age, financial capacity and health vulnerabilities, we were concerned the policy itself may not have been appropriate in the event it wasn't being complied with.
