Firms have been told to urgently review their IT systems and processes for managing customer vulnerability after new independent guidance set higher standards and was adopted by the Financial Ombudsman Service (FOS).
The guide was released by the Chartered Insurance Institute (CII) and Personal Finance Society (PFS) and sets out practical steps for insurance and personal finance firms to close knowledge gaps and address challenges in vulnerability management.
The guidance has been peer-reviewed and aims to help financial services firms implement the principles-based approach of Consumer Duty.
It sets out what IT systems, processes and data infrastructure firms need to identify, record, monitor and report on customer vulnerabilities and consumer outcomes.
It builds on the FCA’s shift from prescription to principles with proof, requiring firms to show evidence of better outcomes and compliance with Consumer Duty.
Andrew Gething (pictured), managing director of MorganAsh, said firms should act now as this guidance is now the standard for the Financial Ombudsman Service.
Gething said: “This new guidance marks a significant step forward in the ability of firms to not only embrace and embed the principles-based guidance of Consumer Duty, but manage customer vulnerability effectively.
“It quickly becomes clear that the right technology and processes are absolutely critical in achieving this and the guidance clearly sets out what good looks like for firms to be able to identify, monitor, support and report on customer vulnerability and consumer outcomes.
“This higher benchmark now becomes the de facto standard for the FOS and means that firms must interrogate their current IT systems and processes to ensure they cut the mustard and take action if they don’t.”
Gething added: “If a firm’s approach cannot demonstrate how they identify and support vulnerable customers – with suitable evidence – they won’t just be out of touch with best practice, they will be out of line with what regulators and the Ombudsman will expect.
“That’s a hard place to defend from in the case of an active complaint.
“Thinking more about the carrot than the stick, rising the meet to this new benchmark will give firms access to robust data and significant intelligence.”
He said: “Not only is this essential in delivering good customers outcomes, but it will enable firms to adapt, personalise and improve their products and services, and know their customers better – unlocking a significant competitive advantage and the real commercial benefit of embracing Consumer Duty.”
