There are millions of people with vulnerable characteristics in the UK and some might not even realise they meet the criteria.

The FCA defines a vulnerable customer as ‘someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care’.

Of course, not every client with a characteristic of vulnerability will come to any harm. But they are at greater risk of harm, so the regulator wants intermediaries and lenders to recognise and identify these clients, then support them with a different level of care if suitable.

There are four key drivers of vulnerability, according to the FCA:

• Health: Health conditions, physical disability, cognitive impairments or mental health conditions can affect customers’ ability to manage their finances. These conditions can be visible and invisible.
• Resilience: People with low financial resilience might have very little wiggle room in their finances, making it hard to cope with sudden changes in their economic situation, such as losing their job.
• Capability: Low financial capability can happen because of a lack of financial or digital literacy, numeracy problems, poor understanding of the English language or limited experience managing money.
• Life events: Life events such as bereavement, divorce, redundancy or serious illness can make a client vulnerable and more liable to mistakes or poor decision-making.

Remember that vulnerability can come and go, so it’s something to look out for at each meeting with every client, as an existing client could experience a life event, such as redundancy, that makes them more vulnerable. And, of course, people can have more than one characteristic of vulnerability, such as those who experience a bereavement, which leads to depression, for example.

You’re not responsible for diagnosing health conditions, but you do need to have processes in place to help you spot the characteristics of vulnerability.

The FCA says that intermediaries should:

• Understand the needs of your target market
• Ensure staff can recognise and respond to the needs of vulnerable customers
• Respond to customer needs
• Monitor whether you’re meeting the needs of customers and make improvements where needed.

There’s a range of things you can do to achieve this. Start by making sure you understand the signs of vulnerability (both overt and more subtle) and that your working practices are designed to take them into account.

This process can be simple but should be written down to prove to the regulator that you are working within its guidelines.

For example, can your client hear you properly, do they understand the information you are telling them and respond appropriately? Or do they seem unsure, nervous or vague about their finances?

Never assume what your client can or can’t do or understand, but ask questions that allow them to give you more information and ask if they need any support.

If you’re an employer, make sure that everyone in your business has read and understands the FCA guidance and knows how to respond to a client showing signs of vulnerability. These can be difficult and sensitive conversations, so your employees must be confident they can handle these situations.

The FCA also expects you to adapt your communications to the needs of vulnerable clients. This could be as easy as using plain English, avoiding jargon or better explaining a product or concept if your client doesn’t seem to understand.

It might mean spending more time to explain a product or simply slowing the pace of the conversation. Perhaps you can make an adjustment, such as offering face-to-face support or remote advice, depending on their preference and needs. Always ask your clients how they want to communicate.

It’s a good idea to familiarise yourself with trusted sources of information and charities, so you can signpost clients to further help where appropriate.

This isn’t a one-and-done issue. You need to regularly check that all your practices are up to date with the latest FCA guidance and update training across your business.

Keep a record of all of your discussions with vulnerable clients, making a note of any signs of vulnerability and what you did to support them (ask permission to record these details).

This is not only important to help with your ongoing monitoring, but also to show the regulator your work in this area. And you need to remain vigilant – the FCA is currently undertaking a review into how firms understand and respond to vulnerable customers’ needs, and will share its findings by the end of the year.

Halifax Intermediaries has produced detailed Vulnerability Guidance, which explains how you can identify and manage client vulnerabilities.

Your network or club should also be a good source of information and the regulator’s Guidance for firms on the fair treatment of vulnerable customers is a great starting point with lots of useful case studies.

Remember, this work is in addition to your obligations under the Mortgage Conduct of Business Rules, Treating Customers Fairly and of course, the Consumer Duty.

In May 2022, the FCA found that 47% (24.9m) of people had characteristics of vulnerability, so you’re likely to come across them in your day-to-day work.

That’s why it’s so important you can identify and support them.

By keeping your communications clear, understanding the characteristics of vulnerability and supporting clients where possible, or signposting to trusted support services, you can continue to help all of your clients get good outcomes.

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