Consumers in vulnerable circumstances are a key focus of the FCA’s three year strategy, published last year.
More recently, much of the regulator’s concern about vulnerable customers was a result of the effects of Covid-19 – “More consumers are vulnerable, or at risk of becoming vulnerable, because of the effects of the pandemic and rising costs of living,” it stated. But while the worst of the virus may have passed, its effects are still lingering in the economy, alongside heightened inflation that has made the financial circumstances of many people yet more fragile.
Almost 28 million UK adults now display at least one characteristics of vulnerability, according to the FCA, with those determined as having low financial resilience totalling 12.9 million. The pressure on brokers to address the challenges facing these customers continues to grow, and it is partially up to lenders across the market to help them to do effectively.
But before any appropriate support can be given, we’ve got to start by helping brokers identify a client with one or many vulnerabilities. How can lenders help?
Hidden vulnerabilities
According to the regulator, the definition comes down to the fact that someone is susceptible to harm as a result of their personal circumstances. By not providing clear and accessible support for clients with vulnerabilities, brokers and lenders alike could risk failing to comply with new FCA consumer duty requirements. While on its own this can seem a little vague, the practicalities mean we need to be thinking about four key drivers:
- Health, conditions such as chronic illnesses or disabilities
- Life events, including bereavement, divorce or redundancy
- Resilience, with extra care needed for those with little ability to withstand financial or emotional shocks
- Capability, including poor knowledge or low confidence in managing money or other key skills, like digital capabilities or literacy.
All of that said, defining vulnerability is easier than identifying it. Many vulnerabilities aren’t obvious. While it’s usually easy to determine if clients have hearing or sight loss, many conditions – physical or mental – are not readily apparent. Some potential short-term issues such as bereavement or marital breakdown may naturally arise in conversations, but this is not the case for all. Long-term issues such as caring commitments may never come up, and some clients might be reluctant to raise them. Whether due to concerns for privacy or the prospect of a successful mortgage application, clients can hesitate to discuss factors that make them vulnerable.
Adding further complication into the mix, clients’ circumstances evolve: We’re all susceptible to vulnerability due to unexpected changes. This goes for existing clients as well as new ones so consistently assessing every client is vital, even if the vulnerabilities are considered short-term.
Looking for clues
Doing this effectively, especially right now when numbers of vulnerable customers are rising, means actively looking for clues.
In part, this means brokers need to ask the right questions – albeit with sensitivity and tact. Most clients will not take kindly to being described as vulnerable, but brokers can ask if a client needs extra help or support with their application and offer empathy and interest to explore any issues that arise.
More than that, brokers need to be on the lookout for indicators of vulnerability. The Coventry for intermediaries’ guide outlines some key clues:
- Auditory clues, both those that explicitly point to potential issues, like references to financial strain or illness, and those that may imply vulnerabilities, such as a failure to understand, a request for repetition or delays in answering questions.
- Visual clues, including clients’ body language or other signs they are upset, stressed or confused.
- Written clues, including writing unclearly or inconsistently, or making requests incurring a financial penalty while failing to mention the loss.
In all cases, brokers should be cautious about making assumptions or leaping to conclusions, but they need to be alert for indications that they may need to explore specific issues further. They should also remember that if a client has one vulnerability, they may have others that need to be identified.
These conversations can be difficult, but building a rapport with a client has always been essential to brokers establishing their customers’ needs and it is something they excel at. As ever, brokers must work to understand and empathise with each client’s personal circumstances, ensuring that lenders are also aware of any additional support clients may need. Ultimately, delivering the best possible outcome for that individual – whether they are vulnerable or not.
Keith Williams is operations manager at Coventry for intermediaries
