How to identify vulnerable clients

Is a client vulnerable? At first glance this appears to be a fairly straight forward question to answer. And advisers should already have an existing approach in place for helping individuals they assess as vulnerable. But is it always so easy to spot a vulnerable person?

This technical bulletin examines what defines vulnerability in clients. It may offer up a few surprises. It might also prompt a review of existing approaches towards client interaction and changes to advice processes.

The FCA define a vulnerable consumer as: ‘Someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care’.

Why an awareness of potential vulnerability matters

Potential vulnerability is more widespread than many imagine:

• Only one in seven adults has literacy skills expected of a child aged 11 or below.

• Just under half of UK adults have a numeracy attainment age of 11 or below.

• Almost half of adults don’t have enough savings to cover an unexpected bill of £300.

• Dementia affects one in six people over 80.

It therefore makes sense and demonstrates best practice to have an awareness and understanding of the issues surrounding vulnerability. Indeed failure to correctly manage a vulnerable client can result in high profile reputational damage and complaints.

Vulnerability is a topic the FCA are concentrated on. In the FCA’s Decision Procedure and Penalties Manual (DEPP) under DEPP 6.5A.2 (calculation of enforcement fines), it states: ‘In deciding which level is most appropriate to a case involving a firm, the FCA will take into account various factors, [including]…whether the breach had an effect on particularly vulnerable people, whether intentionally or otherwise...’

Get Your Policy In Place Today!