ccording to a recent survey, 94% of firms reported that the issue of vulnerable persons is being treated quite seriously or very seriously by their business. For years now, the Financial Conduct Authority (FCA) has raised awareness around the treatment of vulnerable persons by regulated firms. Since 2015, through a series of papers and reports, the FCA is focusing on improving the experiences of vulnerable persons while accessing financial products and services and highlighted the need for better conduct and best practice.

But what constitutes as a ‘vulnerability’ and how does it impact businesses’ relationship with customers?

Definition of a Vulnerable Person

According to the FCA:

A vulnerable person as someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.

Vulnerability could come in many forms. It can be long-term, sudden, or sporadic. The FCA advises that while the definition of vulnerability is broad, it is important to remember that the level of a customer’s vulnerability is very personal to their circumstances, and the timeframe for this potential vulnerability may vary.

Vulnerability could also be exacerbated by the policies and practices for regulated firms. That’s why the FCA requires firms to design their systems and processes which can make a huge difference to the ease with which vulnerable persons interact with them.

What Is Considered a Vulnerability

The FCA has divided the causes of vulnerability into four main categories:

• Health: Changes in physical or mental health which may affect their understanding of financial services and the ability to make decisions. These could vary throughout their life, such as the onset of dementia, or could be a lifelong condition such as learning difficulties.
• Life events: Stress from traumatic events such as bereavement of a loved one, loss of job or income, or divorce. These events could have a significant impact on a person’s ability to engage with their finances and make sound decisions.
• Circumstances: The resilience to bear financial losses. This could include financial hardship, stress, and inability to pay bills. All of these could have an impact on a person’s health and wellbeing.
• Capability: Overall understanding of financial services and products which can vary between individuals. Likely to affect customers with poor financial literacy or those who have migrated to a different country.

Treating Customers Fairly

The FCA’s approach is for firms to place customers at the heart of the business and doing the right thing for the customer. The FCA’s Principles for Businesses require firms to treat customers fairly and to communicate with them in a clear, fair and non-misleading way. Under the Treating Customers Fairly (TCF) initiative, the FCA has set out the expectations from firms. These include:

• Consistent policies: Having appropriate policies and procedures in place across the business to consistently identify and support customers in vulnerable circumstances.
• Sensitivity and flexibility: Approaching vulnerable customers in a sensitive and flexible way. This also includes creating no unreasonable barriers to change product, switch provider, submit a claim or make a complaint, and factoring vulnerability into product design, marketing and service provision.
• Transparency in communications: Being as transparent as possible while dealing with vulnerable customers, giving clear information to customers so that they can make informed decisions.

So how can firms make sure they are consistently meeting expectations while protecting the most vulnerable customers?

Training Your Staff

The key is to take the time to listen and fully understand a customer’s situation so that you can best support them and provide them with the right guidance. Ensure that you are providing adequate training for your frontline staff on how to identify and interact with vulnerable persons. Training your staff is vital in ensuring that as a business you are treating vulnerable customers fairly and providing the correct advice.

As a good practice, many firms, such as RBS and Monzo, now have dedicated teams within customer services who are adequately trained in spotting and supporting vulnerable customers.

Vulnerability can affect any of us, at any point in time. While complying with the FCA’s requirements and keeping in line with regulation is important, but even more so for firms to consider and empathise with vulnerable customers and ensuring that you are undertaking a flexible approach to assist those that may need it the most.