Advisers confident on Consumer Duty and vulnerable customers but data identifies vulnerability perception gap

by | Nov 8, 2022

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The Embark Investor Confidence Barometer has revealed advisers are bought into the overarching principles of the Consumer Duty but have significant concerns over both the practical implementation of the rules and the unintended impact it could have on the advice gap.

The survey also reveals that despite an increase in confidence that they have appropriate vulnerable customer strategies in place, advisers may still be under-estimating the level of vulnerability in their client bases.

The Barometer* found that advisers are largely positive about Consumer Duty. Most advisers surveyed (64%) ‡ think the new Duty will improve the overall experience of their clients. Significantly, almost three-quarters (71%) ‡ of advisers surveyed believe that their firm has the right plans in place to deal with the impact of Consumer Duty, with just 7% disagreeing**.

The survey also revealed that most advisers (60%) agree that Consumer Duty will change the way they think about overall cost to the consumer, suggesting that the FCA’s new regulations are having their desired effect. However, the Barometer also discovered adviser concerns about implementation.


60% of surveyed advisers are worried about the impact of having to evidence that their advice is meeting the standards set by the Duty. More concerningly, two-thirds (66%) ‡ of surveyed advisers said the Duty’s focus on value for money could widen the advice gap by encouraging advisers to reject marginal clients with smaller portfolios. Advisers may show a preference for clients with larger portfolios and more complex needs, where the benefits of their actions can be more easily evidenced under the Duty.

Positively, the Barometer uncovered that adviser confidence in their firm’s strategy for vulnerable customers has soared. Asked if their firm had an appropriate strategy in place to identify and cater for vulnerable customers, 86% surveyed were net confident, with 42% being very confident. Impressively, net confidence is up from 72% in the previous Embark Investor Confidence Barometer in March this year. Additionally, the proportion of advisers answering ‘very confident’ has almost doubled from 22% in March to 42% in this edition. This illustrates that confidence is building over time as advisers adjust to the challenges they face.

There are, however, some troubling statistics on the gap between adviser and customer understanding of vulnerable customer status.Most advisers (68%) surveyed estimate that between 6% and 20% of their customers are vulnerable, with an average estimation of 12% consistent across adviser age groups, geographies, and assets. However, there is a distinct gap between the number of vulnerable customers advisers believe they serve (an average of 12%) and the 19% of advised consumers in the survey who self-identify as vulnerable (19%).


Interestingly, younger advised consumers were more likely to self-identify as vulnerable (25% of those 35-44) compared to older advised consumers (6% of those 55-70). This emphasises the importance of having systems in place that automatically flag potential client vulnerability. More than half (56%) of advised consumers surveyed said that their adviser adequately considers customer vulnerability.

Andrew Phipps, Product Marketing Manager, Embark Group, said: “That the Consumer Duty will change the way many advisers think about the total cost to the consumer is a big positive on the face of it. However, the fact that advisers believe the focus on value for money could worsen the advice gap should be a serious concern for the FCA. These findings highlight the variance between the intended and unintended effects that policies can have.

“The industry may still be under-estimating the true extent of client vulnerability. The current economic, geo-political and social conditions may be acting as a trigger for heightened levels of vulnerability. Discouragingly, that view looks to be backed up by the latest UK stats that show those on long-term sickness hit a record high of 2.5m in summer 2022*** Advisers may need to review their VC strategies to give greater weight to these factors.”


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