Edward Grant, Director, Technical Connection division at St. James’s Place responsible for professional development, takes a practical look at what steps financial planners can take to ensure that clients in vulnerable circumstances are supported
Here’s the dilemma, clients generally do not identify as vulnerable, although the FCA, in its recent Financial Lives survey, identified 53% of UK adults (27.7 million) with characteristics of vulnerability. Why the difference? Is it relevant? And most importantly what should financial planners do to ensure clients in vulnerable circumstances are supported?
Perhaps the best place to start is to challenge the term vulnerable clients. It conjures up negative images and could be holding the profession back in offering relevant, timely and appropriate support. Many organisations across all industries focused their initial attentions at older clients as age is easy to identify. The reality is that vulnerability is multi-dimensional and impacts all ages and all backgrounds; wealth is not a barrier to vulnerability either.
The regulatory stance
As a regulator, the Financial Conduct Authority (FCA) has worked hard to give clarity and in its recent finalised guidance (FG21/1) it reiterated the four key vulnerability drivers of:
- Life events- such as bereavement, job loss and relationship breakdown
- Health – conditions or illnesses that impact upon daily life
- Resilience – low ability to withstand financial or emotional shocks
- Capability–which is best described as low confidence or knowledge in managing finances, literacy, or digital skills.
Impact of COVID
During the period between March 2020 and October 2020 there was a 15% increase in vulnerability characteristics, mainly in financial resilience as a result of the pandemic, as employers or owner managed businesses were impacted by lockdown. If we consider vulnerability as a spectrum, it is the accumulation of circumstances that is likely to increase client risk. It is the role of everyone in the profession to look out for the signs and help raise awareness of the support available.
Clients in vulnerable circumstances are likely to have increased stress levels, perhaps distracted by the emotion of the situation, or because of additional responsibilities. It is not uncommon for them to lack perspective or make reckless decisions. Planners should consider how they can adapt their processes to ensure that they are confident the client is not disadvantaged because of their vulnerability. Being knowledgeable about the spectrum of vulnerability and being empathetic are important skills to embrace.
Become a vulnerability champion
One way of encouraging clients to utilise the assistance available, either from third parties or advisory firms, is to become a vulnerability champion so that you and your firm are recognised as a safe and trusted pair of hands. Making it easy to access support by clearly signposting additional resources via your website, or including it in your literature, helps raise awareness and may even mitigate the need for clients to seek additional support in the long-term. There is excellent expertise available from the charity sector which you and your firm could signpost, for example, MacMillan Cancer Support, for their online financial guidance and support to individuals and families impacted by Cancer. Earlier this year, the Personal Finance Society launched the Financial Vulnerability Taskforce which is a great initiative to raise awareness. It includes a nine-statement charter that UK personal finance professionals can sign committing to a set of minimum standards and includes a charter logo that can be added to website and literature. Many professionals have already signed up and have promoted the initiative to their clients and professional connections through their social media posts and newsletters.
During the pandemic I heard of many financial planners who have innovated their approaches and spent a significant amount of time ensuring that their clients have been able to use video conferencing or online secure messaging tools. There has been an increase in client contact with shorter video meetings including facilitating family wealth meetings bringing the wider family into the discussion. Where there has been low digital capability, planners have adapted their processes to ensure clients are not excluded. They have also discussed the risks of online scams and how clients can take effective precautions. Some advisers as part of their onboarding process obtain written consent from their clients detailing who they should contact, if they believe their client is at risk of scammers. Whilst the GDPR rules have flexibility where client harm is concerned this approach removes any doubt.
Traditionally financial planners encourage clients to consider putting in place Wills and Powers of Attorney. This is an important foundation of sound planning and whilst it does not lessen the emotional impact of the life event, it helps bring greater clarity in respect to financial affairs during bereavement.
Another area that perhaps needs to be considered is digital passwords. We all have today an array of online accounts including savings, banking and utilities that can become inaccessible on death. We have been encouraged to turn off paper statements which will mean that family members or executors will not know about the accounts and how to access them. Encouraging clients to talk about what they have and how their family or executors gain access is now core planning. I recall advisers talking about clients bringing shoe boxes of documents to collate and organise, in a paperless world the virtual shoe box has gone but it remains critical that our digital shoe box is still accessible. Some planners now utilise online client areas where this information can be stored securely.
Recognising clients in vulnerable circumstances and ensuring they can access relevant, timely and suitable support is now a core service and planning to avoid vulnerability should now be interwoven into all financial plans.
Edward Grant is Director in the Technical Connection Division of St. James’s Place, leading the accreditation and technical services teams supporting the St. James’s Place partnership delivering client focused outcomes. Within his role as Director, Edward is also responsible for professional development at St. James’s Place including over 950 Chartered Advisers.
Past President of the Personal Finance Society, Chartered Financial Planner, Fellow of the Personal Finance Society and current Chair of the TISA Tax Committee, Edward is a passionate advocate of the financial planning profession and during his extensive career spanning over 30 years he has sought to support, mentor and lead the development of initiatives to build consumer confidence and trust in financial advice.