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Working with vulnerable clients

25 November 2019

Missing the signs that a client might be vulnerable isn’t something any adviser wants, and with the FCA recently closing a consultation on the fair treatment of vulnerable clients1 it’s an issue of sharpening regulatory focus too.

Some signs of vulnerability are easy to spot. People with serious health conditions, who have reported traumatic life events or who present themselves to you as having a specific personal or circumstantial vulnerability are among the more obvious cases. But there can also be more complex issues that would be easier to overlook.

What is vulnerability?

In its 2018 ‘Approach to Consumers’ document2, the FCA defined a vulnerable consumer 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’.

Some people will already be vulnerable due to personal circumstances - either permanently or temporarily. Others (likely far more) will potentially be vulnerable, meaning they have characteristics that make them susceptible to vulnerability.

The FCA has identified four key drivers of vulnerability (health, life events, resilience and capability) and included examples for each in its recently closed guidance consultation.3

The FCA’s four key drivers of vulnerability

Health Life events Resilience Capability
Physical disability Caring responsibilities Low or erratic income Low knowledge or confidence in managing financial matters
Severe or long-term illness Bereavement Over indebtedness Poor literacy or numeracy skills
Hearing or visual impairments Income shock Low savings Low English language skills
Poor mental health Relationship breakdown Low emotional resilience Poor or non-existent digital skills
Low mental capacity or cognitive disabilities Having non-standard requirements such as ex-offenders, care leavers, refugees Lack of support structure Learning impairments
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Working with older clients

As people age some of these scenarios are, naturally, more likely to apply. That makes the issue of vulnerability a practical one that advisers working with clients approaching, at or in retirement may increasingly find they have to address.

While the typical client might once have annuitised at retirement, pension freedoms mean they may now remain invested well into their 70s and even their 80s. And with dementia and cognitive decline inevitably becoming more commonplace in an ageing population, ensuring clients understand how their retirement savings are invested and the best courses of action for making the most of them could involve dealing with complex forms of vulnerability.

There are two challenges here. The first is to recognise vulnerable clients and understand their needs. The second is to put practices in place that will ensure you support them appropriately.

Recognising vulnerability

In its Financial Lives survey, the FCA found that half of UK adults display one or more characteristics of being potentially vulnerable.4 Yet research by Just Group found that advisers record an average of just 5% of their clients as being vulnerable.5

While potential vulnerability may not be as widespread amongst the advised client cohort as in the general population, the size of this gap could also suggest it’s often difficult to spot the signs.

There are no easy answers here. It’s more about being aware of the different forms of vulnerability and the potential client detriments. It won’t always be straightforward to get the information from a client that might be needed, given they might well be reluctant to disclose certain vulnerabilities.

The FCA’s draft guidance on the fair treatment of vulnerable customers offers pointers on specific steps to take, but – as with many other aspects of advice and planning - it will often be the quality of your relationship with a client that enables you to identify and understand someone’s situation.

Supporting vulnerable clients

The second challenge is supporting vulnerable clients effectively. That will include recording the relevant information properly (particularly under GDPR), communicating appropriately and knowing how a potential or actual vulnerability might impact on financial decision making.

A client suffering cognitive impairment might seem able to comprehend some of what is being discussed with them but begin to struggle as more complexity is introduced, for instance. This is where your relationship with the client’s wider family can be important, with matters such as Power of Attorney to consider if there is a clear problem with mental capacity or perhaps a concern that some family members have an unhealthy influence on the decisions being made.

The FCA’s draft guidance emphasises the need to make sure those dealing with clients are sufficiently trained to recognise and respond to vulnerable customers’ needs appropriately. It uses the simple example of a staff member knowing when it would be better to read out information to a customer than to point them in the direction of an app or a website.

Getting it right

A well thought out approach to identifying and managing vulnerable clients can – as with anything done well - bring potential benefits for you as well as for them. It may help strengthen your relationship, for instance. And in the case of older clients, where a family is involved in looking after someone with vulnerabilities properly, it could lead to intergenerational planning opportunities over the longer-term.

Important information

Please remember the value of your clients investments and any income from them can go down as well as up and your client may get back less than the amount they originally invested. Past performance is not a guide to future performance.


1 FCA - Guidance consultation Guidance for firms on the fair treatment of vulnerable customers - July 2019

2 FCA - FCA Mission: Approach to Consumers - July 2018

3 As for note 1, page 7

4 As for note 1, page 3

5 Financial Reporter - Advisers expect FCA to take on supervision of vulnerable consumers - 5 Feb 2019


Learn more

The FCA’s guidance consultation adds to a growing body of helpful material for those who want to build their skills and expertise in this area. If that includes you, we offer these links as a helpful place to start.