HOW PARAPLANNERS CAN IDENTIFY VULNERABLE CUSTOMERS

It is estimated that one in four adults in the UK suffers from mental health issues each year¹ and, while not all people in this category will be vulnerable, this is an important marker to be aware of in a client profile. Does the client seem anxious or distracted? Have they mentioned any problems or major life events, even in passing? Has their attitude or appetite to risk changed? These signs may be subtle, so it is important to give the customer plenty of time to speak to pick up on any changes.

Not all vulnerability is easy to spot. A client that you’ve been dealing with for years, who has never shown any signs of vulnerability, may become vulnerable over time. This could be a short-term condition or a deterioration in health or an unexpected change in circumstances that persists over the medium- to long-term.

The FCA has laid out four key drivers to customer vulnerability²: health events, life events, capability, and resilience. You can check these aspects regularly by asking direct questions about any expected medical costs or considerations, any changes to financial security, or whether they believe their financial goals are still on track.

It is important to keep detailed records of customer circumstances, even where they are not vulnerable, to more easily detect changes in clients’ behaviour over the long-term. It is worth noting here that, under GDPR, you are required to obtain explicit consent from the customer regarding what information you collect, specifically any medical information and the expected duration of any vulnerability.

While life events such as job loss or long-term illness can be easily pinpointed, vulnerabilities can also arise from domestic or financial abuse, divorce, or financial capability. These can be difficult topics for the customer to bring up and can be easily missed. Some clients may not realise they are vulnerable so it’s important to retain a calm, open and empathetic approach when talking to them.

If you suspect that a customer is suffering from a potentially difficult situation that you feel you are not qualified to address directly, there are a number of support services that you can contact, such as Women’s Aid, Refuge, or the Men’s Advice Line. You can also consult our financial advisers’ guide to financial abuse.

Customer understanding is one of the four outcomes of the Consumer Duty and each customer will need a slightly tailored approach to achieve this. Some clients may be happy to receive information via email, but are these emails opened and checked in a timely manner? Some customers may be happy to talk over the phone, but do they have trouble hearing you? Are they talking with someone else while they talk to you? You may need to offer alternative modes of communication. It is important to take the time to regularly check the client’s understanding of information and that they remember previous correspondence and conversations, to validate that information is being understood and recalled.

Customer understanding is one of the four outcomes of the Consumer Duty and each customer will need a slightly tailored approach to achieve this. Some clients may be happy to receive information via email, but are these emails opened and checked in a timely manner? Some customers may be happy to talk over the phone, but do they have trouble hearing you? Are they talking with someone else while they talk to you? You may need to offer alternative modes of communication. It is important to take the time to regularly check the client’s understanding of information and that they remember previous correspondence and conversations, to validate that information is being understood and recalled.

¹ Money and Mental Health Policy Institute; Seeing through the fog: how mental health problems affect financial capability.
² FG21/1 Guidance for firms on the fair treatment of vulnerable customers.
³ Chase UK: how to spot signs of financial abuse.

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