Customers need to trust financial services firms to feel comfortable enough to reveal vulnerabilities and get the help they need, industry professionals have said.
Reacting to the Financial Conduct Authority’s (FCA’s) message to consumers to share information with firms after its research found just 42% of people disclose their vulnerabilities, Jonathan Barrett, CEO of duty of care assessment firm Comentis, said the company was “disappointed to see that the FCA is putting the onus on the customer to self-report their vulnerability status”.
He added: “Not only is this alarming, but it’s misguided. The emphasis should be on the firms themselves to ensure good outcomes for their customers, not on the customer to self-report.”
Firms need to be proactive with vulnerability
Barrett said: “Let’s be clear here: relying on customers to be open about a potential vulnerability will never work. As evidenced in the FCA research, not only is there unfortunately a real stigma and sense of shame surrounding the prospect of being vulnerable, but it’s also entirely possible that the customer themselves might not even be aware that they’re at risk from a vulnerability in the first place.
“We welcome further communications on this in the coming days to better emphasise the importance of active vulnerability identification and re-establish the onus on firms ensuring that all customer groups get equally good outcomes.”
Introducing Lloyds Living
Sponsored by Halifax Intermediaries
Challenges monitoring and recording vulnerabilities
Jayne Brown, lead consultant at Simplify Consulting, said the findings came as no surprise, adding: “We as an industry need to do more to build confidence, strengthen relationships and have a safe route for customers to volunteer this information more frequently.
“There’s been an increased focus over previous months for firms to use tools and techniques within their processes to identify vulnerability characteristics and, most of the time, firms struggle with this due to the nature of transient vulnerabilities, the complexity and cost in adopting technology and having suitably qualified teams capable of providing the support required.
“Historically, it has been incredibly difficult to identify those more subtle vulnerabilities and solutions that are still needed, especially as customers are reluctant to share their personal situation.”
She said customers needed to be given the courage to share personal information and be sure a firm would take appropriate action.
“We then need to be better as an industry in logging and sharing this information securely, so that the customer is spared the requirement to repeatedly share that insight throughout the lifecycle of their products and services,” Brown added.
Melanie Spencer, sales and growth lead at Target Group, said this highlighted the struggles among firms to support customers, especially when it came to monitoring and taking action.
Spencer added: “One of the biggest stumbling blocks that the FCA continues to identify is a lack of good-quality data among firms. Without this critical step, it becomes much harder for firms to understand who their vulnerable customers are, let alone what outcomes they are receiving and how best to provide support.
“Making those necessary changes to internal systems and processes or the investment in both in-house technology and vulnerability training can also be a real challenge for firms so focused on meeting their core responsibilities.”
She also noted that more firms were outsourcing these tasks to relieve the burden on internal teams and bridge knowledge gaps.
Spencer added: “The regulator wants to see a proactive approach among firms – one that is aware of customer needs and can adapt to provide the right support throughout their journey.
“This is not an easy feat, but with the right technology, training and partners, there is an opportunity to truly know our customers, improve and tailor the service they receive and monitor outcomes effectively – all while building the necessary intelligence to meet the requirements of the regulator.”
However, Andrew Gething, managing director of MorganAsh, said the take-up of technology to support firms in meeting these requirements “remains very slow”.
He added: “While some are waiting on the wider distribution chain for answers, others are trying to build their own or bolt on to existing systems. Then there are those trying to meet these requirements with no tech at all – something even the FCA has recommended against.
“In truth, technology already exists in the market to help identify vulnerable customers, monitor outcomes and even provide suitable next steps at the very moment vulnerability is identified – something that is incredibly hard to do with frontline training alone. This gives firms the robust data to monitor all outcomes throughout the customer journey and report on this as required. As ever, consistent and objective assessment remains the most effective and cost-efficient way to unlock the data firms need.”
He said technology existed to help firms identify vulnerable customers, monitor outcomes and provide suitable next steps.
Gething added: “It is clear that there is still a huge knowledge gap surrounding customer vulnerability and Consumer Duty. With no changes announced to current guidance or expectations, we now have a platform to ensure firms truly understand the requirements, why it is important and what strategies, training and technology they can put in place.”
Build a trusting relationship
Michael Reed Smith, customer service director at Standard Life, part of Phoenix Group, said it was understandable that some customers were reluctant to share this information, despite there being better outcomes for those who did.
Reed Smith said: “Trust remains a significant barrier, and it’s important a culture of integrity and understanding is fostered by providers so customers feel safe to open up. Based on these supportive levels of transparency, there must be clarity around why certain personal information is needed and the help that is available.
“By breaking down barriers to disclosure and providing clear signposts to support, we can ensure that everyone – particularly those in vulnerable circumstances – gets the necessary care and guidance.
“Long term, it’s important that we build a culture of collaboration across the financial services sector to share industry best practice when supporting vulnerable customers. This will increase consistency in people’s interactions with different firms and ultimately boost trust in us all.”
Anthony Scammell, customer outcomes director at Quilter, said the financial services industry had come a long way with the treatment of vulnerable clients, but “sufficient levels of trust have not been established with everyone to get vulnerable clients to open up”.
He added: “While initiatives and technology can help identify potential instances of vulnerability, some may be falling through the cracks.
“There will naturally be a balance between compliance and data protection requirements, but this should not hold firms back from providing frontline staff with training and the tools to be able to have open and honest conversations with clients or be in a position to spot a vulnerability at the earliest opportunity.”
Scammell said Consumer Duty underpinned these practices, adding: “It is something that should be at the heart of a financial services company’s culture. This is not a box-ticking exercise and businesses will be expected to demonstrate how they have improved processes and how good customer outcomes are being met for everyone, including those that are vulnerable.”
