The FCA is taking immediate action on customer vulnerability; but what does it mean for firms?

by | Jun 24, 2022

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By Jonathan Barrett, CEO and Co-Founder at Comentis

Over the last few years, identifying and supporting vulnerable clients has become a priority within financial services, with the FCA due to finalise rules relating to its Consumer Duty directive before the year is out.

It’s a valuable change, requiring firms to put good consumer outcomes at the heart of their business and demonstrate that those outcomes are being met.

However, in the last few days, the industry has been thrown something of a curveball. New guidance has been issued by the FCA, alongside an open Dear CEO letter explaining that it will no longer wait for Customer Duty to take effect before taking action to improve customer outcomes.


In short: there’s no time to waste. Firms must act now.

Rarely does the FCA act so urgently. That being said, it’s plain to see what’s prompted this change. Last week’s communications from the FCA feature discussion of how more than 80% of adults reported an increase in their cost of living during March 2022, and how 27% of the population is suffering with low financial resilience.

As Richard Farr, our own Non-Executive Director at Comentis, explains, “the FCA’s direction of travel on vulnerable customers has been clear for some time, but the pressure caused by current inflation and the so called ‘cost-of-living crisis’ has brought the urgency of implementation into sharp focus due to last week’s FCA communications to lenders.”


While many firms are eager to be there for their vulnerable clients, there are plenty for whom this announcement will cause concern, not least due to the immediacy of the communication. The guidance has made clear that identifying and supporting vulnerable customers’ needs to be as systematic as it is consistent, and it needs to be done quickly, too. But, of course, even identifying who is at risk in the first place can be difficult. And then there’s the question of the various processes that need to be in place. Which systems should you choose? How can you ensure that every eventuality is covered? How can one ensure consistency?

If firms are struggling, we urge them not to panic. Help is out there, but they must not delay to seek help as changes do need to be made and quickly.

In the first instance, a simple three-step framework can help shape the different approaches advisers should consider:

  • Identify, link and support

The FCA describes a vulnerable person as somebody whose circumstances make them “especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care”.

It also outlines four key drivers for advisers to consider:

  • Health – conditions or illnesses that affect the ability to carry out day-to-day tasks.
  • Life events – such as bereavement, relationship breakdown or redundancy.
  • Resilience – low ability to withstand financial or emotional shocks.
  • Capability – low knowledge of financial matters or low confidence in managing money.

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