According to the Financial Conduct Authority’s (FCA) latest Financial Lives survey, the number of adults in 2022 with low financial resilience had leapt to 12.9 million – up from 10.7 million in 2020 – with the primary cause thought to be the number who were “heavily burdened by their domestic bills and credit commitments.”
The Organisation for Economic Co-operation and Development (OECD) reported that Britain was suffering the worst cost of living crunch of any G7 nation, while The Money and Pensions Service found that over a million Londoners had less than £100 in savings.
In response, Consumer Duty, the FCA’s initiative to improve outcomes for vulnerable customers, will take effect at the end of July. However, to reduce the chance of a last-minute rush, firms were instructed last year to have created an action plan by the end of October. You would expect, therefore, that by the end of 2022, many mortgage advisers would have been in a strong position.
Slow off the mark on vulnerability
The reality seemed quite different, with research revealing at the end of November that fewer than one-in-five (17 per cent) later life lending advisers were prepared for the upcoming changes. Perhaps even more shocking, nearly one in 10 (eight per cent) didn’t actually know actually if they were prepared or not.
Through our work at Comentis, we’ve found the mortgage market to be slower off the mark when it comes to vulnerability. Likewise, advisers often don’t feel the need to assess every client at every active service point. This is something which has to be taken seriously. There will be unavoidable scrutiny later this year, as the FCA looks to enforce Consumer Duty, and we simply can’t assess whether a vulnerable person has had a good outcome if advisers aren’t first making the appropriate efforts to confirm whether they’re vulnerable.
Firms must be equipped to identify and support at-risk customers at every stage of the process.
What can we expect in 2023?
Help is available. The FCA frequently publishes information for those beginning their implementation journey. Elsewhere, various industry bodies and financial services firms are launching their own support programmes. But training alone won’t be enough. Neither will manually monitoring for potential vulnerabilities. Identifying and supporting vulnerable customers has to be as systematic as it is consistent.
Advisers might assume that achieving this will be an onerous task, adding a huge amount of time and effort to the advice process. But that needn’t be the case. Technology-driven assessment tools can remove subjectivity from the process and ensure consistency. By combining clinical expertise with hard data, these kinds of solutions ensure all vulnerability drivers are in scope, reassuring firms that they will meet the scrutiny of regulatory requirements.
This process will benefit everyone – clients and firms alike. If you’re struggling, or if you know that you need to bring in additional expertise, don’t delay.
