The ageing UK population is increasingly likely to be vulnerable. David Mulholland discusses why legal and financial advisers should work together to offer accessible services
Supporting clients in difficult circumstances is a key part of the financial services industry. From insurance to investments, we focus on protection and planning, accounting for our clients’ needs today and providing for their futures. Legal advice and planning often complements financial advice and it’s vital that clients are offered support from both sets of professionals to ensure they are appropriately protected.
The Financial Conduct Authority (FCA) recently released new guidance for firms on the fair treatment of vulnerable customers. Now more than ever, we must focus on the growing need to support customers in a wide range of difficult circumstances, only exacerbated by the COVID-19 (coronavirus) pandemic, which an FCA survey showed coincided with a 15% jump in the total number of vulnerable adults in the UK.
Financial advisers who research, recommend and review a market-wide range of products and services have a unique perspective on the industry’s ability to serve its clients. Similarly, legal advisers hold a valued and versatile role in helping clients who may become vulnerable to understand and plan for potentially difficult times. Interaction between legal advisers and financial product and service providers is vital.
FCA vulnerability drivers
The circumstances that can create vulnerability (see table below) affect us all.
| Health | Life events | Resilience | Capability |
|---|---|---|---|
| Physical disability | Caring responsibilites | Low or erratic income | Low knowledge or confidence in managing finances |
| Severe or long-term illnesss | Bereavements | Over indebtedness | Poor literacy or numeracy skills |
| Hearing or visual impairment | Income shocks | Low savings | Low English language skills |
| Poor mental health | Relationship breakdown | Low emotional resilience | Poor or non-existent digital skills |
| Addiction | Domestic abuse | Learning impairments | |
| Low mental capacity or cognitive impairment | People with non-standard requirements such as people with convictions, care leavers and refugees | No or low access to help or support |
Statistics from the Department for Work and Pensions show that 46% of adults above state pension age are registered as disabled. People aged 55 to 64, most of whom are in full-time employment, are the most likely to provide informal care to another person – and provide that care more than once or twice a day. 26% of people over 85 are care recipients. Reflecting these figures against the age profile of many client banks within financial and legal services firms immediately alerts us to the need to consider vulnerability within service provision. The FCA aims to begin evaluating firms’ actions around vulnerability in 2023. Senior managers should be able to demonstrate actions to:
- understand the needs of their target market or customer base
- ensure staff have the right skills and capability to respond to the needs of vulnerable customers
- respond to consumer needs through product design, flexible customer service provision and communications
- monitor and respond to the needs of vulnerable customers
- collect data on the impact of policies and processes.
Given the breadth of circumstances which may make clients vulnerable, delivering a process to meet these expectations can seem a daunting task. However, evolving your policy based on staff training, client feedback and service adaptation can build experience and understanding over time. With a cross-industry regulatory perspective and within a community of service providers, there is a tremendous opportunity to help shape future service design and delivery.
At Brooks Macdonald we continue to adapt our vulnerable client policy based on engagement with financial planners and other specialists to foster a community with the knowledge and experience of how best to deliver support for vulnerable clients.
To support inclusive financial services, we have created short animations on investment themes such as risk, loss and the need for advice. It has been a challenge to summarise complex themes in a simple and accessible format and it will be interesting to see how clients engage with the animations. This content may be particularly useful to clients with limited understanding of investment themes, perhaps due to cognitive decline or injury.
We are already seeing growth in demand for investment services that can support clients who may be vulnerable, from retirement income solutions to inheritance tax mitigation strategies, showing a need for service-led solutions that accord with regulatory guidance.
A trusted community of providers and advisers sharing best practice can work towards protecting clients in need of greater support. This in turn offers commercial benefits around enhanced reputation and customer loyalty.
