The FCA's Guidance Consultation has been released along with an updated Financial Live Survey with a vulnerability lens and 21 in-depth case studies. As was to be expected, it acknowledges the impact of COVID-19: it has exacerbated vulnerability and prompted different and lasting impact on those who have suffered as a direct or indirect consequence of the pandemic. The FCA did reveal a staggering 23% in the UK have been furloughed or suffered a loss of income. The prospect that only 50% of people in the UK remain vulnerable, as identified in the 2017 Financial Live Survey, feels unlikely and the financial services industry needs to pay attention to the needs of vulnerable people, now more than ever.
It is clear that vulnerable customers remain a priority and focus for the regulator - not only as a standalone objective but will permeate through all of the regulator’s work as they apply a vulnerability lens to all supervisory and policy work. GC 20/3 elevates the pressure on firms to start implementing the practical changes required throughout the organisation to evidence vulnerable people experience outcomes that are just as good as other consumers. The FCA wants to see the issue being taken seriously and firms embedding a vulnerable-centric approach into culture, policies and across the full customer experience, not just in front-line areas. Senior managers will be asked to demonstrate the actions taken to embed good practice in culture, policies and process. There will be a heightened intention to intervene where there is actual, or potential harm to vulnerable customers and in 2023, the FCA will evaluate the actions firms have taken and whether there has been sufficient improvement.
The regulator acknowledges that lots of good work has been done but not in all firms, which has led to customer harm. I have previously stated this case but to date, the good work appears focused on specific use cases, or scenarios. The FCA wants firms to turn their attention to being robust in response to the broad spectrum of vulnerability they will encounter across their client base.
The issue of inconsistency remains. No minimum standard will be prescribed but the FCA remains concerned that experiences (same situation, different treatment) continue to be mixed, which represents something of a dichotomy. The industry will need to find a way to collaborate to achieve some basis for consistency. One route is to use the Vulnerability Radar, developed by Altus and TISA, as a common standard to work toward best practice as it emerges. Secondly, I personally found the 21 in-depth case studies the FCA has shared to be a useful source. While they cannot possibly cover every eventuality, they do provide the basis to extract principles of behaviour in certain cases that can be extrapolated and applied.
The Vulnerability Financial Live Survey offers interesting insight. Something that became implicit is how dealing with one vulnerability driver can prompt others, e.g. a health related condition could well cause the customer to be unable to work and impact their financial capacity. 16% of consumers display two of the four drivers. The case studies that are synopsised in the Financial Live Survey highlight some of the complexities firms need to manage. Recognising vulnerability is a key challenge with a focus on the skills and capability of front line staff. A factor that fundamentally shifts the front-line role to requiring a level of emotional intelligence, sympathy and autonomy to act in the customer’s best interest. Customers are reluctant to share information on vulnerability, anxious about the potential implications, or in the belief that it has no impact correlated to the service. Undeniably, the industry requires a PR exercise to make people aware there are, or at least should be, only positive consequences to sharing any issues with providers. Person to person interaction (face-to-face, phone) remains key and preferred, which puts a focus on digital models. As the case studies show, your people can have a profound impact on a customer’s experience.
Overall, the paper provides useful direction but what is clear is that the FCA now expects the industry to act. 2023 may seem a long time away but work is required now to be ready to satisfy the regulator.