Written by Andrew Gething, Founder and Managing Director at MorganAsh
Consumer Duty places particular focus on identifying and measuring the vulnerability of all clients throughout the lifetime of products.
Technology can play a pivotal role in mitigating this onerous task, supporting firms in adopting an objective and consistent assessment of vulnerabilities.
Just as onerous is the expectation that all firms will need to remember the thousands of relevant ‘next steps’ once a vulnerability is identified – and when these should be invoked. It’s a monumental task – just consider the wealth of mitigating strategies, support organisations and charities covering everything from debt, health, bereavement, divorce, domestic abuse and so much more.
Some providers have attempted to offer support in this area with informational PDFs, printouts or spreadsheets of suitable treatments. However, this really doesn’t go far enough to provide the correct information, right at the time of need. Plus, some next steps may only become relevant once or twice a year, meaning any static document or spreadsheet would need to be substantial to cover all possible bases.
We can see how technology can provide a far better solution, with software such as MARS (the MorganAsh Resilience System) automatically generating recommendations on suitable next steps (which MARS calls ‘treatments’). These are based on the specific responses of individual vulnerability assessments and mean there are no long documents to wade through. There’s no need for advisers to remember the complex wheres and whens – and much of the need to train staff on all possible outcomes is done away with. Instead, all the required information is presented, automatically, in real time.
Next steps
While much of the focus around Consumer Duty has been on compliance, having more detailed vulnerability information can highlight opportunities. For example, we know that the FCA’s most recent Financial Lives survey found that more than half of UK adults (53%) did not have any form of protection in the last two years. This tells us that many advised people may lack this form of protection – a clear harm.
The question is, how to identify these? If you’re using a technology-led approach to managing consumer vulnerability, this information could already be to hand, flagging someone’s suitability of life, critical illness and income protection. It can also suggest, based on their vulnerability characteristics, whether they should apply online or be referred to a nominated protection specialist.
By using technology to identify a need, prompt with a suitable product and the best approach for the application, advisers could both streamline their processes and increase the level of protection – something that has long been a hot topic.
There are similar opportunities with annuity quotations. Under Consumer Duty, advisers must evidence they have considered all options – such as an enhanced annuity. From the vulnerability data alone, software can determine the likelihood of an enhancement – and if an online health assessment is sufficient or whether a nurse-led medical assessment is likely to provide the client with a better rate.
Higher interest rates are producing greater returns, sending annuity sales to almost a five-year high, so technology can more easily ensure that advisers meet their regulatory requirements – while better responding to clients’ needs.
Superficial signposting
MARS has numerous treatments, with many more added all the time. It would be hard to see how – without technology – most firms could learn about, and advise on, so many vulnerabilities.
Alongside product triage, MARS can connect clients and their consumers with nurse support services, benefit calculators (to identify missing benefits) and even support those in the debt sector, by spotting potential coercion or involvement with loan sharks. That’s in addition to information on charities and support organisations – to provide direct help within the community, or for a very particular need.
As well as the standard list of treatments provided, firms can add their own using the inbuilt engine within the MARS system.
It’s obvious that there is a chasm between ‘simple signposting’ and using technology to provide more accurate, timely recommendations. Superficially, simple signposting may appear to meet Consumer Duty regulations, but the reality is that a great deal of signposting doesn’t lead to a better outcome; it’s just a ‘well, we sent a leaflet’ kind of solution.
Most professional advisers will want to go the extra mile – to assist clients more proactively at the time of need, offering better resolutions to clients in terms of both signposting and product offerings. A digital approach to vulnerability enables firms to make this a reality more easily, achieving a true value exchange for both the adviser and the client. After all, helping clients through challenging times and difficult circumstances is rarely forgotten – and engenders long-term loyalty.
