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FCA Consumer Duty rules on vulnerable customers: 6 Practical tips for financial services firms

July 18, 2023

Unlock the key to proactive compliance: Practical tips for financial services providers to safeguard vulnerable customers

Discover practical tips for financial services providers to comply with the FCA's Consumer Duty rules on vulnerable customers. Enhance customer outcomes and contribute to a more inclusive financial landscape.

Starting from 31 July 2023, implementing the FCA's Consumer Duty will require financial services companies to establish elevated standards to enhance customer outcomes and take extra care to protect vulnerable customers. This initiative introduces a comprehensive set of updated regulations that firms must implement to demonstrate consideration of customers' needs, characteristics, and objectives.

According to the FCA’s guidance for firms on the fair treatment of vulnerable customers, a vulnerable customer is “someone who, due to their circumstances, is especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care”.

During our recent research, we discovered ample content and data highlighting the vulnerability landscape among UK adults and the hurdles financial services firms face in meeting their requirements. However, we observed a lack of actionable guidance.

To assist firms in taking appropriate care, our team has provided their top tips to help firms proactively comply with the new regulations, safeguard vulnerable customers, and ensure positive outcomes.

1. Treat vulnerability as an inclusion issue

Viewing vulnerability as an inclusion issue rather than just a specific problem certain groups face is important. It is important to ensure that vulnerable individuals are not excluded or overlooked. For example, financial institutions can develop educational programmes to empower individuals with diverse backgrounds and abilities, ensuring they have equal access to financial services.

2. Embed inclusion and financial fairness

Financial firms should ensure that inclusion and financial fairness are part of their ESG framework. This includes being transparent about their approach to addressing vulnerability and measuring their progress. For instance, they can openly share their strategies for promoting inclusion, such as initiatives to provide affordable financial products to underserved communities.

3. Establish the right leadership and culture

Firms should ensure that their leadership and culture prioritise inclusion and financial fairness and engage with customers and employees to create a supportive environment. For example, involving employees from diverse backgrounds in decision-making processes and implementing policies that prevent discrimination and promote equality within the organisation.

4. Use the PPT Framework

Audit your People, Processes and Technology to identify the strengths and weaknesses of your organisation when addressing vulnerable customers' financial risks and challenges.  For example, a vulnerable customer could be an individual who faces financial uncertainty due to inadequate retirement planning. They may require guidance and support to develop a comprehensive retirement plan, access suitable products and services, and make informed financial decisions. The PPT Framework results will help you strategise your approach with your existing people, products and technology in mind, enabling you to deliver the best possible outcomes.

5. Cater to individual life circumstances

Financial products should address customers' financial needs and cater to their circumstances. This includes offering products that are appropriate for their situation (e.g. joint vs single products) and ensuring that customers understand the implications of their choices.

6. Create a holistic approach

Firms should create a holistic approach that considers all aspects of addressing vulnerability and achieving good customer outcomes. This includes the financial aspects and customers' emotional and psychological well-being. For instance, banks could offer financial counselling services or collaborate with mental health organisations to support vulnerable customers facing financial difficulties.

By recognising vulnerability as an inclusive issue and embedding fairness and transparency throughout their operations, firms can create an environment that fosters trust, ensures and evidences good outcomes.

Establishing the right leadership, leveraging customer-focused frameworks, catering to individual circumstances, and adopting a holistic approach further solidifies a commitment to meeting the diverse needs of all customers.

Through these concerted efforts, financial services providers have the unique opportunity to drive positive change, build lasting customer relationships, and contribute to a more inclusive and responsible financial landscape.

Written by
Emma Rose

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