It is something which has been exacerbated by the impact of Coronavirus in recent times.

Product providers and advice firms need to give the FCA’s guidance in this area their full attention to avoid falling foul of the regulator.

Guidance on the fair treatment of vulnerable customers was finalised and came into effect in February 2021.

The FCA’s Financial Lives Survey stated that, "by October 2020, the number of adults with characteristics of vulnerability increased to 27.7 million taking the overall proportion to 53% of all UK adults. Firms can expect to be asked to demonstrate how their business model, the actions they have taken, and their culture ensure the fair treatment of all customers, including vulnerable customers.”

“We will also seek to understand consumers’ experiences of their treatment, for example whether they are experiencing difficulties effectively engaging with firms and accessing appropriate products.” - FCA FG21/1

Once we understand this, and that the FCA views vulnerability as a sliding scale that consumers move up and down dependent on: health; life events; financial and emotional resilience; and personal capability, then we realise that this focus on vulnerability is not merely a sub-division of customer service, or an extra question on the factfind, but is a completely new lens through which to view customers.

Three common failings of firms responding to disclosures of vulnerability are:

1. Not recognising the characteristics of vulnerability
2. Lack of confidence and skills to ask about a customer’s circumstances that may make them potentially vulnerable and how this affects additional support needs
3. Lack of knowledge that support services exist internally and externally and how to ‘signpost’ customers.

Rightly the question is then posed as to how can firms can respond to the call to protect vulnerable customers:

• To fully embrace vulnerability regulation is to redefine the customer/supplier relationship to one of human-to-human compassion and service
• To deliver exceptional service we need a deep understanding of how a customer experiences our products
• To really understand that experience we need to sensitively ask about any influencing factors and circumstances that are impacting the customer
• Purposeful organisations recognise that this is the right thing to do and will establish long-term customer relationships built on a foundation of trust and loyalty. Evidence shows that employees who feel this level of purpose, demonstrate and deliver higher levels of customer care.

Practically, there are tools and vulnerability questioning frameworks that have been widely adopted by customer-facing colleagues which, if understood and implemented well, provide a good basis to identify and provide differentiated service for vulnerable customers. Some of these were identified by the FCA in their consultation and are known by their acronyms; TEXAS, IDEA & CARERS.

The guidance puts the onus on firms to have a new depth of understanding of how customers experience financial products and services in the complex and unpredictable circumstances that life throws at them. This is a far cry from products designed for the ‘average customer’; thus, the expectation is that changes are made right through the business model starting at product design, touching all internal processes and intermediates, and culminating in tailored financial advice and customer service.

Providers and specialist support and training firms have and will develop resources which advice firms would do well to tap into over the coming months as they engage with the vulnerable customers' challenge.

To quantify their expectations, the FCA produced a cost benefit analysis (CBA) applicable to all 52,000 regulated firms. This details the interventions firms need to deploy to meet the guidance, which include: research; staff training; product design; as well as adapting processes and communications.

The CBA estimates the average one-off cost per firm ranging from £3,200 for firms with fewer than 50 employees, to £3.3m for the largest firms. Following initial implementation, the estimated ongoing costs range from £2,400 to £2.4m per firm per year.

The FCA has committed to assessing the progress firms have made in implementing the vulnerability guidance in 2023/24. Getting ahead of this with consideration and provision for vulnerability as part of an overall customer strategy, is sensible as this will be the foundational when the FCA's Consumer Duty Principle is published later this year.

• In December, AKG partnered with Vulnerable Customer eXperience (VCX) to produce a short paper 'Strength in meeting the needs of vulnerable customers' to signpost the importance of financial services companies meeting the needs of vulnerable customers and the wider benefits to companies of doing this. It is available to download at https://www.akg.co.uk/downloads.

Guy Vanner, managing director, actuarial consultants AKG (https://www.akg.co.uk/) & Chris Jones, director of support, VCX (Vulnerable Customer Experience) (https://ifa.elearn.v-cx.co.uk/)