The capability of consumers to engage has been identified as the largest area of vulnerability, according to the latest results from the MorganAsh Resilience System (MARS).
Engagement capability includes key factors such as language, digital interaction and coercion. The willingness to engage was the highest reported issue among MARS users. According to MorganAsh, these traits occur in around 12% of consumers.
MARS breaks down vulnerability into three primary characteristics: health, wealth and life events – mirroring the FCA’s own categories. This is followed by three secondary characteristics: financial capability, engagement capability and support network. As might be expected, physical health issues are far more prevalent than mental health issues.
MARS identifies over 400 variations in characteristic and circumstance that can lead to consumer vulnerability.
The findings come as more firms implement vulnerability assessments, to meet the upcoming Consumer Duty regulations. Without a consistent and objective approach, firms will not be able to properly assess or evidence the vulnerability of all customers, as required by July’s deadline. In addition, firms must monitor this throughout the lifetime of the product.
Andrew Gething, managing director of MorganAsh said: “With firms now starting to receive detailed analysis of consumer characteristics from vulnerability systems, it’s interesting to see users of MARS identifying engagement as a key challenge. Thankfully, amending the client’s communications strategy to overcome engagement issues is a relatively understood issue.
“Understanding the consumer’s ability to engage, and their financial understanding, is already used to guide those who provide advised and non-advised services. The aim is to allow those with good financial knowledge to self-serve, while trying to nudge those who don’t into an advised process.
“At present, firms are reluctant to stop those with poor financial knowledge from transacting on a self-serve non-advised basis – partly to understand the process more, and partly in fear of losing business to competitors. How this plays out once Consumer Duty comes into force will be interesting. We do need more data and to understand this better – and we also need to explore how easy or not to nudge people into advice – and if this is appropriate.
“Consumer Duty should provide a level playing field – so, if consumers switch to a firm with fewer checks, the receiving firm should amend their process. Otherwise, they may find that when the self-policing requirement of Consumer Duty comes into force, others may report them to the FCA. The FCA is already asking firms to pass on such information.”
MARS is designed to help firms to both understand and monitor vulnerable customers – and to deliver good outcomes – as required by Consumer Duty. Through clear and consistent assessments, businesses can identify vulnerable characteristics and generate an objective Resilience Rating – much like a credit score.
Last year, MorganAsh added tailored questions focused on potential coercion to its MARS vulnerability assessment. This means firms can more easily identify how vulnerable each client is to the potential risk of coercion, or susceptibility to scams – with results contributing towards their overall Resilience Rating. To find out more or access a free trial, visit: morganash.com/mars or phone: 0330 159 8162.
