Addressing the elephant in the room during the FCA’s Vulnerability Review | Comentis’ Jonathan Barrett looks at what’s missing

Jonathan Barrett (pictured), CEO of Duty of Care Assessment firm, Comentis shares some of his key takeaways from the FCA’s Vulnerability Review. Importantly, in the following insight, Jonathan highlights a fundamental element that seemed to be missing from the Review itself and supporting communications.

The FCA’s recent Vulnerability Review and it’s supporting webinar aimed to review firms’ treatment of customers in vulnerable circumstances. Whilst the regulator praised firms overall for their work to date to address the needs of vulnerable customers, it also recognised that there was still some room for improvement.

The regulator also alluded to sanctions for firms who fail to act, with the FCA director of consumer finance, Alison Walters, stating: “But of course, as you would expect, when we see poor outcomes, persistent poor outcomes, we can take robust action and we will.”

The FCA consumer research revealed that just 4 in 10 vulnerable customers say they have disclosed their needs to their financial services provider. We would argue that this data is far from what’s reflected in reality. Our data, in fact, (from 175,000 real time assessments) shows the figure of disclosure to be much lower indeed.

In short, very, very rarely do people self-report.

And that’s not really surprising….

Because the thing is, not only is there unfortunately a real stigma and sense of shame surrounding the prospect of being vulnerable, but it’s also entirely possible that the customer themselves might not even be aware that they’re at risk from a vulnerability in the first place. As such, relying on customers to be open about a potential vulnerability (i.e., self-reporting) simply won’t work as a means to identify vulnerability.

What did surprise us though, was the regulator putting the onus on the customer to self-report their vulnerability status. Rather we believe that the emphasis should be on the firms themselves to ensure good outcomes for their customers. And this means they need to get identification right up front – and have a systematic and robust process for doing so. 

So much of the conversation during the FCA webinar focused on processes, training, and good outcomes (all of which are noteworthy of course), but let’s be realistic, none of this means anything if the firm doesn’t get the vulnerability identification right up front. And to do this they need data. Good, quality data.

The regulator says: “Good practice:  [only] A small number of firms used data effectively to identify where customers in vulnerable circumstances were experiencing worse outcomes than others. “

Access to good data, and using it correctly to identify vulnerable customers, is therefore a key area for improvement area for firms, yet it seemed like the elephant in the room during the FCA communications with so few people discussing the importance of it.  

Three of the webinar panel members did bring up the issue of data without prompting, stating things like ‘we need more certain data’, and ‘we need better data collecting’. And we couldn’t agree more – because without it firms cannot identify vulnerable customers and subsequently cannot ensure good outcomes for their customers.

Of course, none of this is simple. We are all too aware of this.

What firms need is a is a means to systematically identify all signs of vulnerability for each and every client, combining clinical expertise with quality data though an online assessment.

Whilst data and identification may have been the elephant in the room during the FCA webinar, it’s time they became front and centre of everything firms do now if they want to deliver on their Consumer Duty requirements.