Organisations need to be aware of vulnerable persons to ensure that all consumers in the financial services industry are protected and treated fairly. The UK's Financial Conduct Authority (FCA) focuses on the importance of safeguarding vulnerable persons to ensure that they are not victims of exploitation or neglect. It is important to be aware of vulnerable persons in the financial services industry because of the complex products and services which are available. If an organisation fails to identify vulnerable persons and safeguard them appropriately, the FCA will penalise the organisation. Therefore, it is of utmost importance for organisations to identify and safeguard vulnerable persons.
How to Identify Vulnerable Persons
The FCA has established three classifications of vulnerability:
Potentially vulnerable: The vulnerability of customers can change over time, and therefore although a customer is not vulnerable at the moment, they could become vulnerable in the future.
Vulnerable: This is a customer who is in a position which places them at particular risk of harm. Therefore, firms must safeguard them to ensure their decisions and welfare are protected.
Particularly vulnerable: These customers are at the greatest risk of harm, which could be imminent and have dangerous consequences. Particularly vulnerable customers could be individuals suffering from mental capacity limitations and mental health issues.
The vulnerability can occur due to a range of reasons, ranging from health problems to limited confidence in managing finances. Therefore, it is important that organisations remain open-minded and consider how their customers could be affected by the vulnerability.
What Happens if You Don't Treat Vulnerable Persons Appropriately?
If an organisation does not treat vulnerable persons appropriately, the consequences could be significantly damaging to the individual and their family. The effects can be financial, emotional and practical, which subsequently can affect the financial situation and well-being of the vulnerable person. These effects include increased stress, financial loss, mental incapacity, infringement of legal rights and unfair treatment.
An organisation's commitment to safeguarding vulnerable persons demonstrates responsibility and integrity, which will subsequently attract customers to their services. Moreover, the organisation will demonstrate compliance with the FCA safeguarding standards.
How can Organisations Help Vulnerable Persons?
To protect vulnerable persons, your organisation must implement relevant procedures and practices. To create a thorough and robust procedure which can safeguard vulnerable persons, you must:
Establish policies: These policies must clearly state how employees should deal with vulnerable persons, including how to identify vulnerability and how to treat each case fairly and considerately.
Systems: Analyse the systems which your organisation uses and decide how these can fairly treat clients, or how they could place them at a disadvantage. Automated systems can hide the vulnerability of customers and therefore you must integrate a way of ensuring the vulnerability of customers is taken into consideration.
Products: Your firm's products and services must be flexible and clear, to ensure that they are accessible for all customers.
Internal Controls: Establishing controls in the workplace, such as employee training, will ensure all employees know how to identify and support vulnerable customers.
The FCA has demanded that firms review their approach to consumer vulnerability to ensure it is effective and compassionate for all cases. The FCA published the Occasional Paper on Consumer Vulnerability to bring vulnerable persons to the attention of financial firms. This paper referenced the ageing population in the UK and the significant changes in public health and society, which has demanded a review of safeguarding policies to protect vulnerable people.
Training and knowledge of how to safeguard vulnerable persons is, therefore, a priority for organisations and their employees.