MorganAsh has warned that firms offering the Financial Conduct Authority (FCA)’s new targeted support must digitise how they manage customer vulnerability to stay efficient and comply with Consumer Duty rules.
MorganAsh pointed to the FCA’s recent consultation paper and said firms cannot offer this advice without knowing about their customers’ situations, especially those who are vulnerable.
The paper set out the need for firms to define consumer segments with shared characteristics and confirmed that vulnerable customers must be considered in segment design and targeted support.
The FCA’s proposals on targeted support are aimed at closing the gap between general guidance and full financial advice, with a focus on making support more affordable and accessible.
Only 9% of UK adults received pensions or investment advice in the past year, so the regulator wants to give people more options, build confidence and improve financial wellbeing.
MorganAsh said firms need to digitise their approach to meet these aims, keep costs down and comply with Consumer Duty.
Andrew Gething (pictured), managing director of MorganAsh, said: “With full financial advice still inaccessible to many, targeted support presents a genuine opportunity to transform the advice landscape.
“To be clear though, firms must be able to understand customers’ characteristics and circumstances to provide targeted support – and to know when it is appropriate to do so.
“Customer vulnerability is absolutely no exception to this and is integral to wider compliance with Consumer Duty.”
Gething added: “The data gathered from digital vulnerability management can profile consumers of similar segments to meet the targeted support criteria.
“If the segments are created too simplistically, without the personal profile data, then firms risk falling foul of vulnerability criteria – and could see targeted support pulled before it really gets going.
“To increase access, targeted support must be cheaper and more scalable than traditional advice.”
He said: “However, we must deliver good outcomes – particularly for vulnerable customers.
“This requires firms to embrace and prioritise digitisation, since any manual approach to customer vulnerability will increase costs and be inefficient.
“Fortunately, technology is available to drive efficiencies and streamline this process, giving firms the data they need – so they know who they are dealing with, can segment effectively and build both proper guidance and rules around these customer groups.”
He added: “While there may be some still unsure about targeted support, we can all absolutely agree that the advice gap is a challenge we must overcome.
“Targeted support will hopefully close that gap, but to do so, firms must have a digital, data-driven approach to ensure they are offering the right support to the right people.”
