With Consumer Duty looming, Tim Farmer, Clinical Director and Co-Founder of Comentis, explains the change in mindset required for advisors to adequately support their most vulnerable customers.
As Consumer Duty edges closer, advisors are well aware that the outcomes they provide for vulnerable customers will soon be placed under intense scrutiny. As a result, they are implementing strategies to ensure they identify and support those at risk.
But as encouraging as this might be, problems arise from the fact that many aren’t quite thinking about vulnerability in a way that will enable them to provide adequate support. Specifically, many of those who come to speak with us at Comentis misunderstand the difference between a vulnerability and a vulnerable circumstance.
To comply with Consumer Duty – and, of course, to ensure at-risk customers are properly supported – this is something that urgently needs to be addressed.
What’s the difference?
The difference between a vulnerability and a vulnerable circumstance is that a circumstance, such as divorce or redundancy, is a trigger – or, to use the FCA’s terminology, a driver. A vulnerability is what someone might experience as a result of that trigger.
Considering the example of bereavement, someone who loses a life partner or close family member is likely to suffer a significant emotional impact. It may affect their mood and consequently their ability to engage and concentrate. By comparison, if someone loses a distant family member, who they perhaps weren’t particularly close to, the emotional impact may be less severe.
The vulnerability, therefore, is not the bereavement itself. Instead, it’s the emotional, mental and cognitive response. This link between circumstance and vulnerability – described as the causative nexus – is something that advisors must understand if they hope to deliver on Consumer Duty.
Why do firms struggle with this?
There are various reasons why advisors have trouble with this. One is that the triggers – or drivers – are often thought to be the vulnerability itself. Drivers are also seen as being fixed, meaning that the bereaved customer who has lost their life partner might be thought of as being just as vulnerable as the customer who has lost a distant relative.
These early misconceptions give way to another issue; specifically, knowing how to provide support. Time and again, firms come to us at Comentis saying they’ve identified a vulnerable customer but don’t know how to support them. Often this happens because they don’t fully understand the impact of the vulnerability. For instance, if the impact is that a change in mood is causing poor engagement and poor concentration, an advisor could conduct shorter meetings or go to the customer’s home rather than calling them to the office.
The problem of looking only at the trigger is further exacerbated by the fact that many advisors believe the step from how they operate now to how they need to operate under Consumer Duty is a small one. They identify that someone is bereaved, they tick the relevant box and think that they’re done. They aren’t appreciating that there are a number of other steps they still have to take.
In their defence, we can’t blame them for this. As a trained clinician, I know what to look for when I hear that someone is suffering with low mood, whereas a broker or financial advisor who hasn’t received the same training won’t. The question, therefore, is how to impart those clinical skills.
What can firms do?
Between now and July, advisors need the means to identify a trigger, assess its impact and understand how to offer proper support.
We know that to begin thinking like a clinician in a matter of months won’t be straightforward. The key to achieving it is that the changes required have to be reasonable; we have to provide a solution that meets Consumer Duty while slotting into a firm’s existing client journey.
Of course, there’s training that can help with this. But to truly determine whether someone is vulnerable – even in cases when they might not realise it themselves – the reality is that every single customer has to undergo an assessment. Digital assessment tools exist that can manage this, removing subjectivity from the process and ensuring consistency. Indeed, there’s a case to be made that these kinds of solutions are the only way to guarantee all vulnerability drivers are in scope. By combining clinical expertise with hard data, they can provide reassurance that a firm will adequately meet the scrutiny of Consumer Duty.
If you’re struggling to begin your implementation journey, or if you know that you need to bring in additional expertise, don’t delay.
For help with identifying and supporting vulnerable customers, visit www.comentis.co.uk
