Speaking after the FCA said a “notable” number of firms had vague policies or processes for identifying vulnerable customers, Andrew Gething (pictured), managing director of MorganAsh, said the regulator’s findings show that many firms are still relying too heavily on customers to disclose vulnerabilities or on staff to identify issues only once they are visible.
“In practice, this reactive approach means most vulnerable customers remain unidentified and hence unsupported,” he said.
The FCA’s Consumer Understanding Review, published this month, identified a number of areas for improvement when it comes to dealing with vulnerable customers.
The regulator monitored firms and found that many were not clear on what good outcomes look like and didn’t have clear ways of measuring them.
It also said there were “unclear and inconsistent approaches” regarding when to act and what actions to take in response to poor outcomes for particular groups. It pointed to a lack of engagement, challenge and direction from senior leaders on this issue.
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Reactive, not proactive
The FCA said a reactive approach, taken by many firms, increases the risk of poor outcomes for consumers, particularly those in vulnerable circumstances, who have historically been more susceptible to harm.
Gething said many vulnerable customers are simply not being identified by a reactive approach.
MorganAsh reported that firms using reactive methods alone are typically identifying 1-5% of vulnerable customers – far short of the ideal 50% figure established by the FCA as part of its Financial Lives survey.
“Where firms rely solely on reactive methods, they typically identify vulnerable customers in the single figures and fall far short of reality. They also fail to gather the quality of data needed to understand the extent of vulnerabilities and what outcomes they are receiving,” Gething noted.
Technology is the key
Gething said IT systems can help to ensure that both reactive and proactive identification of vulnerable customers can be consistently captured.
“The new CII guidance sets out a clear blueprint for firms of what is necessary in terms of IT systems, classification and data infrastructure to not just identify and classify, but monitor, support and report on customer vulnerabilities and outcomes,” he added.
