Financial firms told to do more to support vulnerable customers
According to the latest research by the FCA as many as 27.7 million people are now viewed as being vulnerable. This could be down to suffering from poor health, experiencing negative life events, having low financial resilience or low capability. People in this position may be less able to make reasonable decisions or could be at greater risk of mis-selling, in the FCA’s view.
The regulator has now issued stronger guidance to the firms under its supervision, outlining how they need to treat vulnerable customers.
For example, firms need to go further in understanding what harms their customers could be vulnerable to, and ensure that they receive the same fair treatment as other customers.
The regulator gives the example of investment and pension firms, who are likely to have older customers, and so common characteristics of vulnerability could include their health or life events that come with old age. By contrast, for firms selling high-cost credit products, customers may be more likely to be vulnerable due to a lack of financial resilience, such as inadequate or erratic income.
The FCA emphasised that firms need to demonstrate how they are considering the needs of vulnerable customers throughout the entire process, from product design to how the firm communicates.
More important than ever
Nisha Arora, director of consumer and retail policy at the FCA, noted that the impact of the pandemic meant that it was more important than ever that financial firms got their approach to vulnerable customers right.
She continued: “While some firms have made significant progress, we want to see all firms across sectors taking steps to understand and respond to the needs of their customers, particularly those who are most vulnerable to harm.”
The guidance was welcomed as a “powerful call to action” by Joanna Elson, chief executive of the Money Advice Trust charity, who argued it would give firms a “crucial steer” on what they need to do now to ensure that the support they offer is appropriate for their customers.
She added: “While we have seen much progress already from firms in recent years through our training work, it is crucial that firms further build on this. We look forward to working with firms to bring the FCA’s expectations into reality for their customers.”