# The FCA is taking immediate action on customer vulnerability; but how does this impact advisers?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-07-06
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: FCA Urgent Action: Addressing Vulnerability Due to
Meta Description: New guidance from the FCA on managing customer vulnerability in light of rising living costs. Learn how to identify and support vulnerable clients effectively.
URL: https://financedigest.com/the-fca-is-taking-immediate-action-on-customer-vulnerability-but-how-does-this-impact-advisershtml

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_![Jonathan Barrett, CEO and Co-Founder at Comentis](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/209-1736815600350-compressed.jpg)_

_By **Jonathan Barrett,** CEO and Co-Founder at_ [_Comentis_](https://www.comentis.co.uk/)

Just recently [new guidance](https://www.fca.org.uk/firms/treating-vulnerable-consumers-fairly/ensuring-fair-treatment) has been issued by the FCA, alongside an [open Dear CEO letter](https://www.fca.org.uk/publication/correspondence/dear-ceo-letter-rising-cost-of-living-acting-now-support-consumers.pdf) explaining that it will no longer wait for Customer Duty to take effect before taking action to improve customer outcomes when it comes to vulnerability. Seldom have we seen the FCA act so urgently. That being said, it’s plain to see what’s prompted this change. [Last week’s communications](https://www.fca.org.uk/firms/treating-vulnerable-consumers-fairly/ensuring-fair-treatment) from the FCA feature discussion of how more than 80% of adults reported an [increase in their cost of living](https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/articles/impactofincreasedcostoflivingonadultsacrossgreatbritain/november2021tomarch2022) during March 2022, and how [27% of the population is suffering with low financial resilience](https://www.fca.org.uk/publications/research/financial-lives-2020-survey-impact-coronavirus#lf-chapter-id-the-impacts-and-experience-of-covid-19-impact-on-finances-and-financial-resilience).

Certainly the FCA’s direction of travel on vulnerable customers has been clear for some time, but the pressure caused by current inflation and the so called ‘cost-of-living crisis’ has brought the urgency of implementation into sharp focus due to last week’s FCA communications to lenders.

While many firms are eager to be there for their vulnerable clients, there are plenty for whom this announcement will cause concern, not least due to the immediacy of the communication. The guidance has made clear that identifying and supporting [vulnerable customers’](https://www.financedigest.com/how-financial-advisers-can-assess-mental-capacity-in-their-vulnerable-customers-in-2022.html "How Financial Advisers Can Assess Mental Capacity In Their Vulnerable Customers In 2022") needs to be as systematic as it is consistent, and it needs to be done quickly, too. But, of course, even [identifying who is at risk](https://www.financedigest.com/legal-entity-identifiers-leis-how-can-banks-minimise-risks.html "Legal Entity Identifiers (LEIs): how can banks minimise risks?") in the first place can be difficult. And then there’s the question of the various processes that [need to be in place](https://www.financedigest.com/fintech-needs-women-5-reasons-why-this-is-the-place-to-be.html "Fintech needs women – 5 reasons why this is the place to be"). Which systems should you choose? How can you ensure that every eventuality is covered? How can one ensure consistency?

If [firms are struggling](https://www.financedigest.com/firms-struggling-with-the-s-in-esg-should-look-to-social-housing-for-a-blueprint.html "Firms struggling with the ‘S’ in ESG should look to social housing for a blueprint"), we urge them not to panic. Help is out there, but they must not delay to [seek that help as changes do need to be made and quickly](https://www.financedigest.com/seeking-right-tone-new-uk-pm-truss-had-to-quickly-change-gear-for-queen.html "Seeking right tone, new UK PM Truss had to quickly change gear for queen").

First, advisers should identify whether any vulnerabilities exist. The FCA describes a vulnerable [person as somebody whose circumstances](https://www.financedigest.com/the-personal-circumstances-currently-driving-equity-release-enquiries-and-how-to-reach-the-right-decision.html "The personal circumstances currently driving equity release enquiries and how to reach the right decision") make them “especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care”. It also outlines four [key drivers](https://www.financedigest.com/increasing-demand-for-high-speed-motors-key-driver-of-switched-reluctance-motor-market-finds-tmr.html "Increasing Demand for High-Speed Motors: Key Driver of Switched Reluctance Motor Market, Finds TMR") for advisers to consider, namely, health, life events, resilience and capability.

These signs can be difficult to spot, especially when clients either hide their situation or [don’t believe](https://www.financedigest.com/1-in-3-adults-dont-believe-school-education-prepared-them-for-adult-life.html "1 in 3 adults don’t believe school education prepared them for adult life") they’re financially vulnerable. This is particularly true for the more cognitive based triggers, resilience and capability. Likewise, what one adviser deems vulnerable might not be considered the same by another. But with the right tech and processes, a truly objective [process can be achieved](https://www.financedigest.com/what-businesses-can-achieve-with-microsofts-full-suite-of-process-automation-tools.html "What businesses can achieve with Microsoft’s full suite of process automation tools").

Then they [must understand](https://www.financedigest.com/finance-execs-must-understand-ai-or-risk-falling-behind.html "Finance execs must understand AI or risk falling behind") the link between the driver and the creation of a vulnerability. What’s imperative here is assessing the extent to which each driver impacts that person’s circumstances. In other words: which factors are making a tangible difference? The impact of the driver (or drivers) needs to be fully understood for the appropriate support to be adopted. What we have seen through the assessments carried out on our platform is that there are often a [number of impacts to a single](https://www.financedigest.com/record-number-of-migrants-arrive-in-britain-by-boat-on-a-single-day.html "Record number of migrants arrive in Britain by boat on a single day") driver. For example, where bereavement is the driver, we are seeing multiple [vulnerabilities identified](https://www.financedigest.com/identifying-areas-of-vulnerability-why-cybersecurity-shouldnt-be-an-afterthought-for-financial-organisations.html "Identifying areas of vulnerability: Why cybersecurity shouldn’t be an afterthought for financial organisations"), and these vary from person to person. What is clear is that one approach to bereavement for example, is unlikely to offer the right levels of [support another client](https://www.financedigest.com/bny-mellon-strengthens-support-for-treasury-services-clients-in-germany-with-appointment-of-gungor-taner.html "BNY MELLON STRENGTHENS SUPPORT FOR TREASURY SERVICES CLIENTS IN GERMANY WITH APPOINTMENT OF GÜNGÖR TANER"). It is [really important](https://www.financedigest.com/what-is-guest-post-placement-why-it-is-really-important.html "What is Guest Post Placement? Why it is really important?") to understand how the circumstance is affecting the individual and then support accordingly.

Finally, they will [need to identify](https://www.financedigest.com/what-is-a-legal-entity-identifier-and-who-needs-one.html "What is a legal entity identifier and who needs one?") the optimum response pathway. They should ask: what is the temporal nature of the situation? A customer might only be at risk temporarily – perhaps they’re between jobs or have suffered a breakdown of their relationship. Others might be permanently at risk (for example, suffering from a terminal injury or condition), while some could be experiencing fluctuating fortunes dependant on a [wide range](https://www.financedigest.com/exclusive-wide-ranging-solarwinds-probe-sparks-fear-in-corporate-america.html "Exclusive: Wide-ranging SolarWinds probe sparks fear in Corporate America") of circumstances.

They will also need to determine where the vulnerability is rooted. The factors could be individual (personal health circumstances), environmental (redundancy), institutional (use of jargon, selective communication channels) or even a mixture of all of these.

Once advisers understand the situation, they can identify appropriate responses. For example, if a [financial adviser](https://www.financedigest.com/top-north-east-financial-adviser-firm-talks-corporation-tax.html "Top North East financial adviser firm talks corporation tax") discovers that their customer is hard of hearing, and a company they deal with only communicates with them over the phone, it’s likely they’re dealing with a permanent presentation that stems from an institutional root. The solution would be to change the way the institution [engages with the customer](https://www.financedigest.com/chatbots-the-secret-weapon-to-customer-engagement.html "Chatbots: The secret weapon to customer engagement?") – email or live chat, for instance, would be an easier way to communicate. This is one of countless potential scenarios, of course, and there are many many more.

The underlying message, however, in light of last week’s [announcement from the FCA](https://www.fca.org.uk/firms/treating-vulnerable-consumers-fairly/ensuring-fair-treatment), is that firms must not approach this half-heartedly. There’s no scope to simply paper over the cracks here. A long-term solution is required; and indeed, one that will hold up to regulatory scrutiny.

There’s no doubt about it, identifying vulnerable [customers can be daunting for firms](https://www.financedigest.com/how-can-financial-firms-improve-customer-service-after-the-pandemic.html "How Can Financial Firms Improve Customer Service after the Pandemic?"). But help is available. Technologically driven assessment tools exist that can help to identify [financially vulnerable customers](https://www.financedigest.com/disconnected-customers-are-one-of-the-biggest-problems-facing-financial-companies.html "Disconnected customers are one of the biggest problems facing financial companies") and get the right systems in place to ensure consistency across a whole client base. For instance, our platform at [Comentis](http://www.comentis.co.uk/) combines clinical expertise from mental health experts and psychologists with hard data, to present a fact-based assessment of individuals and their circumstances, as well as how a vulnerable circumstance is likely to impact the client, removing the subjectivity from the process. Given what we have discussed above, arguably clinical led [solutions are the only way](https://www.financedigest.com/5-ways-data-integration-solutions-are-helping-financial-organizations-deliver-improved-outcomes.html "5 Ways Data Integration Solutions Are Helping Financial Organizations Deliver Improved Outcomes") to assure that all the vulnerability drivers are in scope, thereby giving firms reassurance that their systems and controls will be adequate to meet the scrutiny of regulatory requirements.

In the long run, this process will benefit everyone; clients and firms alike. If you’re struggling, or if you [know that you need](https://www.financedigest.com/4-things-you-need-to-know-about-mortgages.html "4 Things you Need to Know About Mortgages") to bring in additional expertise, don’t delay. This needs to be done properly. And as of last week, it needs to be done now.


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