Written by Andrew Gething, managing director at MorganAsh
Consumer Duty in financial services and similar regulation in utilities require firms to understand who their vulnerable customers are and then look after them. Ideally, we want to improve the outcome for those who are vulnerable – or at least not make their situation worse through action or inaction.
When organisations discover a consumer with vulnerabilities, the actions they take are variable. A highly popular process is called ‘signposting’, which is where they refer consumers to another organisation to help them. This can take many forms, from a close partnership and cooperative approach to simply giving the address of a popular charity – such as Age UK or Macmillan. Many organisations signpost without having any relationship with the charity itself, while some will have ‘partnership’ arrangements with a set number of organisations.
From our decades of experience with ill and vulnerable consumers, we have observed some key challenges. Firstly, many consumers may state one issue to hide an underlying one, while signposting to one silo may not be enough to support those who suffer from a combination of issues. Thirdly, an approach that requires the consumer to proactively contact organisations to resolve the issue is unlikely to work.
Hence we can infer some principles for managing vulnerability – namely that simple signposting has a poor chance of success and the potential to actually increase harm to the consumer. Furthermore, for those in severe distress, they probably need a person to help them untangle their issues; someone with empathy who will listen. This requires human participation, since a simple digital solution is unlikely to be effective.
Consumer Duty requires firms to demonstrate – at least annually – that the vulnerable are experiencing no worse outcomes than the resilient. However, considerable evidence from charities and consumers groups demonstrates that vulnerable consumers do experience worse outcomes to the resilient. The emphasis is therefore on firms to prove this is not the case, or more likely, to identify these vulnerable cohorts and have a plan to rectify this. This is certainly pertinent, as the FCA continues its review of how firms approach vulnerable customers.
How much effort should a company put in to understand a consumer’s issues? The answer, in financial services, is to understand enough to not expose consumers to a harm which delivers a poor outcome. We know many sufferers will not proactively disclose many issues unless directly asked, and even then, may not disclose, depending on the techniques used for the assessment. When this is discovered, firms need to upgrade the assessment methodology to ensure the particular vulnerabilities are being detected earlier in the process.
Consumer Duty requires firms to upgrade from understanding enough to protect the firm, to proactively understanding enough to ensure they do not put consumers in harm. We suggest simple signposting has only become popular as it is zero cost, without too much assessment of the benefit or costs of further approaches. If it can be digitised then it costs even less. However, as we have identified, this may not be effective and could result in more harm than good, and reputational damage.
Tools such as the MorganAsh Resilience System (MARS) already provide multiple options for assessing consumers, from short digital questionnaires to user assessment to nurse assessments for the more complex risks. This enables firms to undertake the appropriate level of vulnerability assessment for the risk of potential harms. For example, in financial advice, a firm may use the extensive online questionnaire for some risks, but for high risk investments they may use the nurse led assessment to ensure all vulnerabilities are disclosed.
We can arrange partnerships once and then share this with all users, so removing the burden of lots of bespoke partnership arrangements, thus saving firms and the service/charity providers time and costs.
We are also working to provide different levels of service so those who want a more in-depth service can easily access this. Within MorganAsh, we provide a nurse management service to help consumers with multiple and complex issues. We partner with specialists to then refer on to those who can help, such as addiction clinics, specialist debt providers and many more.
To refer between financial organisations requires authorisation by the FCA, and we maintain these permissions. Within the medical arena we maintain medical indemnity insurance to protect ourselves should we ever refer or signpost to an inappropriate organisation. We fear many organisations are blissfully signposting to health organisations without appropriate assessment and may well be exposed to medical liability if things go wrong.
Clearly this is just one approach, but we hope raising these issues helps firms to consider not just how they assess and manage their vulnerable customers, but how they determine what are the suitable next steps to provide support.
