Data from vulnerability support provider MorganAsh, from its MorganAsh Resilience System (MARS), tracked how different sectors were performing against Financial Conduct Authority (FCA) benchmarks for vulnerable customers.
Based on three years of data, it found that mortgage firms reported a smaller proportion of vulnerability across their client base than advice firms, which reported that 42% of customers were vulnerable.
Mortgage firms also report a smaller share of very vulnerable clients, at 13%, while advice firms say 22% of customers meet this threshold. MorganAsh said the discrepancy could be due to the differences in customer age profiles across the sectors.
Its findings showed that on average, around 50% of customers were marked as vulnerable, aligning with the FCA’s Financial Lives Survey.
Firms operating in the insurance sector, which MorganAsh said closely reflects the general population, said 48% of customers were in vulnerable circumstances.
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The debt sector reported 99% of customers as vulnerable, even when excluding financial vulnerabilities. MorganAsh said this sector contributed to the wider average of 50% of vulnerable customers.
The firm said the 50% average was useful, but it was better for firms to compare levels of vulnerability with their sector peers.
The MARS system assesses customers and generates a resilience rating, similar to a credit score, to determine their vulnerability between very resilient and very vulnerable.
Andrew Gething (pictured), managing director of MorganAsh, said: “With most firms reporting a proportion of vulnerable customers close to the FCA’s benchmarks, it really calls into question those firms that still say they have few to no vulnerable customers. In reality, what they have is a significant data problem – they don’t have the robust data required to know who their vulnerable customers are, let alone what challenges those customers face and the outcomes they receive. Given the clear requirements set out under Consumer Duty to identify, monitor, support and report on customer vulnerability, this is a clear issue. More recently, the FCA has requested firms consider the impact of the Iran war and hence, firms need extensive data to be able to assess these scenarios.
“While firms will have different proportions of vulnerable customers based on their sector, it’s still important to benchmark ourselves against other sectors and established data points like the FCA’s Financial Lives Survey. The findings are a great example of the advancements we’re seeing in digital customer vulnerability management, helping firms to improve accuracy and bring real efficiencies to understanding, monitoring and reporting on customer vulnerability. With the right foundations in place, there is the opportunity to unlock the competitive advantage and commercial benefits of being closer to clients, improving and personalising products and services.”
MorganAsh is also urging the sector to adopt the Chartered Insurance Institute’s newly published guidance on managing customer vulnerability. The document provides a practical framework to implement the principles of Consumer Duty, a benchmark for IT systems, vulnerability classification and data infrastructure to ensure firms across financial services have consistent data and can identify, monitor, support and report on both vulnerability and outcomes.
