Financial services firms often fail to properly understand client vulnerability leading to poor outcomes, according to a whitepaper from compliance firm TCC.
The compliance specialist said this poor understanding often means opportunities to provide additional support were being missed.
TCC published its whitepaper on the back of the Financial Conduct Authority's (FCA) Financial Lives Survey released in October. The regulator found half (50%) of UK consumers - 26.5 million people - displayed one or more characteristics of vulnerability.
This statistic increased to more than two-thirds (69%) for UK adults aged 75 and over, and around three-quarters (77%) for those aged over 85.
The FCA then published its ‘Future Approach to Consumers' paper last month, emphasising the requirement for financial services firms to protect vulnerable customers.
In its whitepaper, TCC identified four common gaps in vulnerable customer programmes: culture, policy and process, an inflexible approach to managing third-party access, and disclosure.
In terms of policy and process, TCC said firms often had a high-level policy in place when dealing with vulnerable customers, but that this was infrequently supported by adequate training, procedure, and controls to ensure that the policy is resulting in fair outcomes on the frontline.
Many firms also struggled to manage customers' initial disclosure of vulnerability, it said, as frontline staff do not necessarily feel adequately informed to have conservations around what was likely to be sensitive information.
TCC also said firms needed to ensure a customer-focused culture was supported by ownership and accountability at every level so the right outcomes for vulnerable customers can be achieved.
The compliance firm also found some firms' processes made it difficult for a third party to liaise with them on behalf of vulnerable customers. Only accepting authorisation in writing, or limited options that did not consider the customer's circumstance or preferences, were some examples it highlighted.
"Firms must recognise the scale of the issue and act to determine how many customers are, or may become, vulnerable in some way," TCC added. "It is best for their customers and for their business."
Four point plan
The firm outlined four key points to help firms deal with vulnerable clients:
- Ensure a good understanding of the nature and potential indications of vulnerability, while taking care to avoid stereotyping customers or making assumptions about their circumstances and needs.
- Do not view vulnerable customers as an obstacle or problem. The FCA expects firms to ensure they receive fair outcomes and that a firm's actions don't exacerbate their situation.
- High level policies must be supported by robust controls and training throughout the business to ensure fair and appropriate outcomes are being delivered.
- The focus on vulnerability involves taking extra care to ensure customers receive the right outcomes, rather than whether they qualify for a particular financial product or not.
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