Just a couple of weeks later in July, the final Consumer Duty details were released by the FCA covering customer vulnerability.
Both the guidance and duty detail have been a long time in the making. And while the FCA’s direction of travel on vulnerable customers has been clear for some time, the pressure caused by the cost of living crisis and the impending recession has rightly brought yet more urgency to this fundamental, yet complex, issue.
Additional support may be needed
Due to a lack of fanfare on release, some will be mildly surprised to see that the existing Fair Treatment of vulnerable customers guidance is now baked into some of the new Consumer Duty rules. This means that no matter how hard or complex customer vulnerability identification and support may be for brokers (and indeed the wider financial services industry), the needs of individual clients must be adequately and fairly assessed, and further support has to be provided for those who require it from now on.
But in reality, it’s about time too.
Without this, brokers will fall behind in being able to understand their target market cohorts or adequately design services that best serve their customers. They will also be unable to provide good outcomes across the board or demonstrate to the regulator – through the use of solid data – that they are meeting the needs and providing good outcomes to all their clients who might be in vulnerable circumstances.
Working in harmony
Never has it been more important for brokers to sit up and take action to make sure they are supporting their vulnerable clients. The fundamental challenge remains, however, that there could be a considerable split between the broker and product provider when it comes to vulnerability assessments.
In fact, it is easy to envisage vulnerability assessments being conducted by both the broker and the product provider separately, and despite both knowing they have equal obligations, neither one being willing to disclose their findings; potentially hiding behind the excuse of UK GDPR.
But this duplication will help no one, least of all the customer.
If fair outcomes to the financial vulnerable is to become a fundamental part of financial services and for brokers to make truly informed decisions on customer vulnerability, then both broker and product provider will need to work more closely together. They will also need to share their vulnerability data more smartly.
Data sharing compliance
However, this of course raises issues around the dangers of sharing data, specifically around UK GDPR. I have lost track of how many times I have been asked how brokers can execute their duties and discharge their responsibilities to a product provider in accordance with the FCA’s requirements (and now policy under PS22/9) in respect of vulnerable customers, while also remaining UK GDPR/Data Protection Act (DPA) 2018 compliant.
But it needn’t be such an arduous task.
Through the work of the Association of Professional Compliance Consultants Vulnerability working group, it is my belief that UK GDPR/DPA 2018 and vulnerable customer management across distribution channels can live in harmony. In fact, they must.
The key to ensuring that this relationship works is transparency, disclosure, ensuring customer understanding and discharging responsibilities efficiently and effectively. And it’s here where a correctly and well worded privacy template will be essential.
If the privacy or fair processing notice of the adviser is drafted correctly, and the terms of business with all the lenders are adequate, then all should be well.
Going all in
The underlying message to brokers is that they must not approach customer vulnerability half-heartedly. Rather, they must work with their fellow industry professionals to ensure a more joined up approach from the off.
A long-term, collaborative solution is required; and indeed, one that will hold up to regulatory scrutiny long term.
