Just 4-in-10 vulnerable customers say they have disclosed their needs to their financial services provider, new research released today from the Financial Conduct Authority (FCA) shows.

However, those that do open up tend to have better experiences. Three quarters of vulnerable customers who told their firm about their circumstances (74%) said that staff asked the right questions to understand their situation, 6 in 10 (57%) said their firm ‘cared’, and (58%) said their firm took action to provide support they needed.

Anyone can become vulnerable due to health, life events, ability to withstand financial or emotional shocks, or because of poor financial or digital literacy.  

The research finds that vulnerable customers are more likely to report a negative experience with financial services firms, such as their bank or insurer, when compared to non-vulnerable customers.

The FCA issued guidance to help financial services firms support consumers in vulnerable circumstances in 2021 and introduced the Consumer Duty in 2023, which requires firms to deliver good outcomes for all customers, including those in vulnerable circumstances. The FCA has today published a review and good and poor practice examples to further help firms provide the right care consistent with the Consumer Duty.

Sarah Pritchard, Executive Director, Competition, Markets and International at the FCA said:

“It can be hard to tell your bank or insurer about your specific needs but those who ask for help tend to feel more supported. We’ve seen good examples where financial firms are making a difference for vulnerable customers, but we know that vulnerable people report more negative experiences than others.

“We want firms to build on the good work identified, to help people open up and make sure they get the support they may need.”

The FCA has shared Case Studies to demonstrate some examples of good practice as follows:

Mailk’s anxiety

Malik suffers from anxiety and often finds himself severely overwhelmed. Nine months ago, his rent increased, and he panicked.

He phoned his bank about his rent increase, and told them about his anxiety. His bank offered regular phone calls to check in and offer support.

Malik is now more confident about his finances and trusts his bank more. He particularly likes how it is the same person who calls him every time. It feels like someone is looking out for him, and he does not have to explain his circumstances.

Rebecca’s hearing

Rebecca wears a hearing aid which connects to Bluetooth. She normally has no issues talking on the phone, but during one call with her bank her hearing aid temporarily glitched and the call dropped. She explained this to the call handler.

Her bank now proactively sends email summaries of phone calls. She found the change helpful and appreciated the positive steps her bank took without her having to ask.

Nathan’s meetings

Nathan has cystic fibrosis, which limits how much he can work.

He approached his bank to discuss his overdraft.

His bank invited him for regular in-branch meetings to discuss his finances and offer advice. Nathan felt comfortable enough to disclose his cystic fibrosis to them.

His financial situation has since improved, and he has begun to save regularly. Nathan trusts his bank much more now.

Commenting on this update, Jayne Brown, Lead Consultant at Simplify Consulting, said:

“It comes as no surprise that the level of customers sharing their vulnerabilities with their financial services provider is so low (4/10), but it is positive that where they did, 74% felt that the firm asked the right questions.  We as an industry need to do more to build confidence, strengthen relationships and have a safe route for customers to volunteer this information more frequently.

“There’s been an increased focus over previous months for firms to use tools and techniques within their processes to identify vulnerability characteristics and most of the time firms struggle with this due to the nature of transient vulnerabilities, the complexity and cost in adopting technology and having suitably qualified teams capable of providing the support required.  Historically, it has been incredibly difficult to identify those more subtle vulnerabilities and solutions that are still needed, especially as customers are reluctant to share their personal situation.

“Engaging with a financial services provider, who will potentially provide services to a customer throughout their lifetime in the case of SIPP products, but for other wrappers too, is like taking on a partnership. Both parties of the partnership can benefit hugely here by working together.  We need to promote good experiences with customers to give them the courage to share their personal details with the knowledge that the firm will take the appropriate action.  We then need to be better as an industry in logging and sharing this information securely, so that the customer is spared the requirement to repeatedly share that insight throughout the lifecycle of their products and services.  And of course, to follow up and meet their support needs so that the customer can achieve their desired outcome.”

Tom Selby, director of public policy at AJ Bell, comments:

“The term ‘vulnerability’ covers people in all manner of situations, from those who face mental health struggles, physical health issues, cognitive impairment or financial hardship. The often transient nature of vulnerability means it can also be incredibly difficult, if not impossible, for firms to spot. While speaking to your financial services provider might be the last thing you want to do when you hit hard times, this research shows that people who do often have a better experience as a result. Firms often have different processes in place for customers with specific vulnerabilities, but these can only be triggered if the firm is aware of your situation.

“For anyone using some or all of their retirement pot to buy an annuity from an insurance company, being honest about any health or lifestyle factors that might reduce your life expectancy is absolutely vital. Being open about a physical ailment with a firm you don’t know might feel uncomfortable, but when it comes to annuities it could result in you receiving thousands of pounds more income each year.

“Reforms currently under consideration by the FCA which will introduce more personalised nudges, known as ‘Targeted Support’, have the potential to drastically improve the help and support millions of people receive, including those with vulnerable characteristics. Firms will design interventions under Targeted Support based on common characteristics of ‘people like you’, utilising data on cohorts of customers to inform the nudge. Being honest about any potential vulnerabilities you have will be critical here too, as the more a firm knows about your circumstances, the better targeted its suggestions will be.“

Andrew Gething, managing director of MorganAsh, said: “While it is positive to see the FCA is reporting good progress on supporting vulnerable customers, it’s absolutely clear that there is still real work to be done by a large number of firms. This is further proven by separate research released by the FCA, which shows vulnerable customers are still experiencing poorer outcomes.

“The review findings set out four key areas of improvement and picks up on many of key themes identified in its recent review of Consumer Duty board reports – particularly around the clear lack of good quality data.

“Whether it’s effective outcomes monitoring, appropriate support for both staff and customers or clear communications, the take up of technology to support firms in meeting these requirements remains very slow. While some are waiting on the wider distribution chain for answers, others are trying to build their own or bolt on to existing systems. Then there are those trying to meet these requirements with no tech at all – something even the FCA has recommended against.

“In truth, technology already exists in the market to help identify vulnerable customers, monitor outcomes and even provide suitable next steps at the very moment vulnerability is identified – something that is incredibly hard to do with frontline training alone. This gives firms the robust data to monitor all outcomes throughout the customer journey and report on this as required. As ever, consistent and objective assessment remains the most effective and cost-efficient way to unlock the data firms need.

“As many other reports have identified, it is clear that there is still a huge knowledge gap surrounding customer vulnerability and Consumer Duty. With no changes announced to current guidance or expectations, we now have a platform to ensure firms truly understand the requirements, why it is important and what strategies, training and technology they can put in place. This will be the theme of workshops we are set to launch to support firms in their customer vulnerability journeys and in their efforts to meet the regulator’s requirements.”

Michael Reed Smith, Customer Service Director at Standard Life, part of Phoenix Group, said: “Managing finances can feel overwhelming for those experiencing vulnerability, and it’s completely understandable that many feel hesitant about sharing their personal circumstances. However, as the research shows, those who are able to disclose their needs are more likely to receive the best possible support. Trust remains a significant barrier, and it’s important a culture of integrity and understanding is fostered by providers so customers feel safe to open up. Based on these supportive levels of transparency, there must be clarity around why certain personal information is needed and the help that is available.

“By breaking down barriers to disclosure and providing clear signposts to support, we can ensure that everyone – particularly those in vulnerable circumstances – gets the necessary care and guidance. Training our teams to recognise and respond to vulnerability with compassion and practical solutions is key, so we can effectively tailor our products and service to individual needs. Long-term, it’s important that we build a culture of collaboration across the financial services sector to share industry best practice when supporting vulnerable customers. This will increase consistency in people’s interactions with different firms and ultimately boost trust in us all.” 

Chris Fitch, Vulnerability Lead at the Money Advice Trust, said:

“The FCA’s Review addresses the importance of consumer vulnerability disclosures. But the most significant findings are that the majority of firms were unable to monitor or take action on outcomes for vulnerable customers, and that most had not made significant progress on product and service design for vulnerability. It is notable, too, that nearly half of firms had not provided training to staff in non-frontline roles.

“These ‘firm-side factors’ may explain why the FCA’s new consumer research reveals vulnerable customers had poorer outcomes than non-vulnerable customers on almost every service experience measure used.”

Richard Monks, UK Financial Regulation Partner at EY, comments: “Today’s publication from the FCA marks a shift in tone, placing greater onus on customers to disclose their financial circumstances than before. Whilst some firms will welcome the more conciliatory tone from the regulator and its renewed commitment to working with the industry to improve both practices and outcomes, the report highlights a number of issues requiring immediate action from providers. 

“Outcome monitoring and design of products and services were specifically called out by the regulator as key areas lacking progress. Despite the headline focus on customers disclosing their own needs to a greater degree, firms must not be complacent. It is clear that the regulator expects a high bar and further improvement from firms, who should take the time now to review current practices against the FCA feedback to ensure they’re continuing to meet expectations and are providing the best possible support to customers facing difficulty.”

Tony Hall, Head of Business Development, Saffron for Intermediaries:

“The FCA’s encouragement of greater flexibility in mortgage stress testing is a welcome step toward in improving access to lending, particularly as interest rates ease. However, while the adjustments may help creditworthy borrowers secure financing, it’s essential that lenders apply these flexibilities responsibly to avoid overleveraging and financial strain.

“Crucially, access to high quality mortgage advice must remain central to any solution. Mortgage brokers play a vital role in helping borrowers make informed decisions as lending criteria evolve. Regulation should not prevent people who can afford a loan from getting the loan size they need, but any changes must be carefully considered to avoid higher default rates, especially if borrowers are navigating options without an adviser’s support.” 

Mark Eaton, COO at longer term mortgage lender April Mortgages, comments:

“While regulatory flexibility is a positive step, it’s equally important to ensure borrowers remain protected from the risks of future interest rate rises and the higher mortgage costs that could follow.

“Stress rates are designed to do exactly this and have played an important role in ensuring borrowers were able to in part absorb the payment shocks they have seen recently when exiting short term fixed rate products.

“There are already options available to reduce the impact of stress testing and provide long-term payment stability, such as mortgages with fixed terms of 10 years or more. Greater regulatory support to expand access to these products across the UK would be a welcome move, offering borrowers more choice and financial security in an evolving market.”

Commenting on these findings, Conor D’Arcy, Deputy Chief Executive of the Money and Mental Health Policy Institute, said:

“This review underlines that people in vulnerable circumstances still aren’t consistently getting the service and outcomes from financial services that other customers receive.

“It’s worrying that only a minority of customers in vulnerable circumstances have disclosed their needs to financial services providers, and our own research suggests that this proportion is particularly small for people with mental health problems. That means that an alarmingly high share of people who could really benefit from extra support are missing out – which can have big impacts on our finances and our mental health. 

“This isn’t a new problem, and we know what the solutions are. Firms need to be more proactive in encouraging customers to share their needs and to take tangible action in response to disclosures. To really deliver that step up in outcomes for people in vulnerable circumstances, the FCA must be ready to step in decisively with firms that consistently fail to meet the expectations set out in the vulnerability guidance.”

Money and Mental Health works directly with financial services through its Mental Health Accessible consultancy programme to improve support for customers in vulnerable circumstances, including making it easier for people to disclose their needs. 

Conor D’Arcy said:

“When firms take steps to address the barriers that people face in disclosing their needs, the results can be transformative for customers. The FCA’s review highlights lots of areas where firms have made big strides. But it also points to gaps in firms’ understanding and where more needs to be done. It’s great to see the FCA pull out the importance of getting lived experience insight and testing communications with customers as a way to fill those gaps, which our Mental Health Accessible team has helped some of the biggest banks in the country to do.”