Vulnerable Customers Matter: Firms Must Now Walk the Talk As FCA Announces Thematic Work

In its recently unveiled 2024/25 business plan, the Financial Conduct Authority (FCA) has set its sights on ensuring fair treatment for vulnerable customers by announcing thematic work in the approaching year.

While the FCA previously committed to undertaking follow-up work back in 2021, its also probable the need for a revisit is supercharged by the FCAs dip testing into various sectors over the last 12-months as part of understanding how firms are progressing with the Consumer Duty. On a few occasions firms approaches to identifying and managing vulnerable customers has been found wanting it seems.

The FCAs 'Dear CEO Letter' to the Wealth Management Sector at the end of 2023, is one such example as well as the Consumer Duty Implementation Good/Poor Practice, published in February this year. This is likely to be frustrating for the FCA, given that the concept of treating vulnerable customers fairly, pre-dates the Consumer Duty!

So, with the FCA’s spotlight now shining on how retail firms are treating vulnerable customers, it’s imperative for businesses to take (and be able to evidence) proactive steps to ensure compliance and uphold ethical standards.

Here are key actions firms may wish to consider in preparation for the FCA’s thematic work:

Define Vulnerability: Firms must establish a clear understanding of what constitutes vulnerability within their customer base. This may include factors such as age, health, financial literacy, or life events that could impact a customer's ability to make informed financial decisions. Ensure your Vulnerable Customer Policy is up-to-date, relevant and seen by all colleagues.

Assess Current Practices: Conduct a thorough review of existing policies, procedures, and customer interactions to identify any gaps or areas for improvement in how vulnerable customers are identified, supported, and treated. Ensure negative frictions in the customers journey are identified and removed.

Staff Training and Awareness: Invest in comprehensive training programs to educate staff members on recognizing signs of vulnerability and implementing appropriate support mechanisms. This may involve training in empathy, active listening, and tailored communication techniques. Ensure this is tailored to all colleagues, from the board down. The treatment of vulnerable customers should be a concern for everyone at all levels, not only those at the coalface!

Tailored Products and Services: Develop or adapt products and services to better meet the needs of vulnerable customers. This could involve simplified terms and conditions, flexible payment options, or alternative channels for accessing support and information. Ensure product and service design frameworks incorporate inclusive design principles, so that building for vulnerability is always the norm, not an afterthought. (most people are vulnerable at some point and in some way, so why not start off with that assumption when thinking about customer needs?)

Enhance Accessibility: Ensure that all communication channels, including digital platforms, are accessible to customers with diverse needs and abilities. This may include providing options for large print, audio, or braille formats, as well as offering assistance for customers with disabilities. Cross-check with your 'customer understanding' work to ensure that any feedback on customer documentation takes into account the needs of customers who may have particular needs, such as dyslexia, for instance.

Data Protection and Privacy: Implement robust data protection measures to safeguard the personal information of vulnerable customers. Firms must uphold the highest standards of confidentiality and respect customer privacy, particularly when dealing with sensitive information.

Monitoring and Reporting: Establish regular monitoring mechanisms to track how vulnerable customers are being treated throughout their interactions with the firm. Develop clear reporting procedures for any instances of non-compliance or customer detriment. Ensure your complaints team is fully trained on spotting vulnerabilities via its interactions with customers - what valuable information can they add into the mix?

Engage with Stakeholders: Collaborate with consumer advocacy groups, industry peers, and regulatory bodies to share best practices and foster a culture of continuous improvement in supporting vulnerable customers.

Rinse and Repeat: This isn't a once and done exercise. The firms approach to vulnerable customers should be a continual learning cycle with the business always looking out for where change might be needed. Ensure you have the correct management information to support this process on an ongoing basis and to evidence good outcomes.

By taking proactive measures to prioritise the fair treatment of vulnerable customers, firms not only demonstrate their commitment to ethical business practices but also mitigate the risk of further regulatory intervention (the S.166 is currently a very popular supervisory tool!) and potential reputational damage.

Embracing a customer-centric approach that values inclusivity and empathy will not only benefit vulnerable individuals but also contribute to a more resilient and sustainable financial services ecosystem as a whole.

If you would like to discuss a vulnerable customers health-check to ensure your firm is meeting regulatory expectations, please reach out. Prevention is always better (and cheaper) than cure!.