“Therefore, whilst you may not necessarily need to have every single individual retail client's circumstances, whether they're vulnerable or not, it is absolutely incumbent on you to think about the target market of this particular IFA that you’re working with. What about the predominant forces of vulnerability within that client base? And what can you do in order to manage your product or service proposition, or in terms of communication?
“Communication is actually quite a big one. How do you need to adapt that in terms of format, in terms of frequency, in order to ensure that your role in that distribution chain is aiming at ensuring good client outcomes at the end of it?” he said.
A follow-up question on this subject asked whether future FCA questionnaires to wealth managers would ask whether a firm operated on an adviser as agent basis, as it has not done in the past.
Hulme said he was happy for the FCA to look into this for the third iteration of the questionnaire which would be coming out after Christmas.
He added: “It's not about if you are acting on an agent as client basis then you therefore are somehow free from thinking about vulnerability. You're part of that distribution chain, and it's absolutely incumbent on yourselves to ensure that you are part of that.”
Identification is key
Reynolds was asked whether the regulator had a preferred way of monitoring outcomes for clients with characteristics of vulnerability, to which he answered there was no “straight or simple formula to use”.
He said: “Focusing on identification is the absolute step one because it's so important, once you've made that identification and understood what those characteristics are and what those features are, then it's about monitoring that over time, making sure you're keeping track of that.
“It's about really making sure you've thought about what information you need to be able to understand those different characteristics, and then their monitoring comes from that.”
One member of the audience asked how firms were expected to identify vulnerable clients if they are not told by the clients themselves.
Hulme answered: “I don't think a firm should ever be relying on clients to be the sole reason as to why you're recording them as with vulnerable circumstances or not.
“The key there is, you've got a situation where a client may not wish to share their vulnerabilities with you, they may also not realise that they are in a situation of vulnerability, and that's a really important point, and a proactive approach from a firm to ensure good client outcomes will help build trust, help support that client even more. There's listening, but then there's also listening for, or looking for, what the triggers are.”
