MorganAsh publishes vulnerability checklist to help meet Consumer Duty requirements

MorganAsh has published a 10-point checklist to help firms meet the vulnerability requirements of Consumer Duty.

This followed the recent announcement by the Financial Conduct Authority (FCA) confirming that it will begin to review how firms approach and treat customers in vulnerable circumstances.

Consumer vulnerability is a key pillar of Consumer Duty, requiring firms to identify and monitor vulnerable customers throughout the lifetime of products, and ensure they receive outcomes no worse than the resilient.

The checklist includes key considerations such as the assessment of all customers, rather than just subsets, and all vulnerabilities, not just purely financial.

It also covers any provision for protected characteristics, such as age, gender and sexual orientation, as well how firms respond to the monitoring and reporting requirements – with board reports needing to be ready for July.

In line with the FCA’s findings, MorganAsh argued that if firms are reporting vulnerable customers in the single digits, that number is likely to be incorrect.

Evidence, including the FCA’s Financial Lives survey, has shown that around 50% of UK adults are vulnerable in some way at any one time.

Firms using the MorganAsh Resilience System (MARS) reported results between 30% and 100%.

Andrew Gething, managing director of MorganAsh, said: “Many firms are now realising that managing consumer vulnerability is trickier than they first thought – with assessments by individuals delivering inconsistent results and hence difficulty in providing good data for reporting.

“The checklist focuses on the common areas of weakness we have been discussing with the FCA and we expect to be high on their agenda with this review now underway.

“In practice, few firms meet all the above requirements, especially when it comes to reporting and monitoring.

“We recommend having plans in place to demonstrate progress and intent – as there is little excuse to be not assessing customers when interacting with them at point of sale or during annual reviews.

“It quickly becomes clear that good data and a clear process is essential in meeting the requirements of Consumer Duty.

“Vulnerability management software – such as MARS – is fundamental in making this easier for firms, all while keeping costs down and driving better client relationships.”

The 10-point checklist is as follows:

  1. Do you have easy-to-access processes to allow customers to disclose vulnerabilities?
  2. Are you assessing for all vulnerabilities – health and life events – as well as financial wealth?
  3. Are you attempting to proactively assess all customers, not a subset (such as those who phone in, claim or default)?
  4. Do you wait for customers to volunteer that they are vulnerable or self-identify a vulnerability? (We have found that this reveals only a small proportion of the vulnerable population.)
  5. Are your advisers/agents assessing vulnerability? (We have found that these can often underreport so, if this method is used, then it needs extensive training and monitoring.)
  6. Are you recording those with protected characteristics, to ensure they receive equitable outcomes, in accordance with the Equality Act?
  7. Are you monitoring changes in vulnerabilities over the lifetime of a product? (This may be the distributor, the manufacturer or both. Hoping that the other is doing this isn’t going to cut it.)
  8. Can you evidence how you act on identified vulnerabilities – for example, changing how you communicate, or amend your processes?
  9. Can you evidence of all the above – using good quality, consistent data?
  10. Will you be able to report, for July, on the outcomes received by vulnerable cohorts at board level (bereaved, divorced, those in debt, those with a life-limiting illness and so on) compared to the resilient?