"Changing culture is never easy but vulnerability requires a rebrand from its external focus on clients."
For the past year I have followed the FCA agenda on ensuring vulnerable customers get fair treatment from the financial services industry. A final consultation paper had been expected by now, but the coronavirus forced a rethink of resource at the regulator and simultaneously offered an opportunity for the regulator and sector to pause and learn lessons from the pandemic.
However, the FCA release last week a Guidance Consultation along with an updated Financial Live Survey with a vulnerability lens and 21 in-depth case studies. As was to be expected, it acknowledges the impact of Covid-19: it has exacerbated vulnerability and prompted different and lasting impact on those who have suffered as a direct or indirect consequence of the pandemic. The FCA did reveal a staggering 23% in the UK have been furloughed or suffered a loss of income. The prospect that only 50% of people in the UK remain vulnerable, as identified in the 2017 Financial Live Survey, feels unlikely and the financial services industry needs to pay attention to the needs of vulnerable people, now more than ever.
It is clear that vulnerable customers remain a priority and focus for the regulator - not only as a standalone objective but will permeate through all of the regulator’s work as they apply a vulnerability lens to all supervisory and policy work. GC 20/3 elevates the pressure on adviser firms to start implementing the practical changes required throughout the organisation to evidence vulnerable people experience outcomes that are just as good as for other clients. The FCA wants to see the issue being taken seriously and advisers embedding a vulnerable-centric approach into culture, policies and across the full client experience, not just in front-line areas. Senior managers will be asked to demonstrate the actions taken to embed good practice in culture, policies and process. There will be a heightened intention to intervene where there is actual, or potential harm to vulnerable customers and in 2023, the FCA will evaluate the actions firms have taken and whether there has been sufficient improvement.
A turn of events with an upside but one that has left the industry in a state of flux, waiting on the final piece of the jigsaw on how to satisfy the regulator’s desired outcomes.
2020 has become a lost year for vulnerable customer regulation but one where we have all learned a great deal about what it means to be vulnerable and how we can support particular needs. The pandemic has had an impact on us all, whether the mental health implications of lockdown, changes to income or through illness. In a business sense, advisers have had to adapt quickly to the changes imposed by working from home. That has hastened the implementation of capability that could benefit vulnerable customers (e.g. digital authority), which may have taken much longer to happen under ‘normal’ circumstances.
I have witnessed a noticeable upturn in advisers wanting to have a conversation through lockdown on the practical challenges of helping vulnerable customers. In February this year, we launched the Vulnerability Radar in a joint venture with TISA. This free tool permits advisers to assess and benchmark their capability around supporting vulnerable customers and to date, more than 100 firms have signed up across a broad spectrum of the industry. Results from the tool so far suggest that there is real interest in engaging with the challenge of vulnerability and a thirst for answers.
However, the FCA’s fair treatment of vulnerable customers initiative, unlike more mechanical pieces of regulation, is not a one-and-done activity. It will require change over the medium term to make it a silent part of business as usual, not unlike Treating Customers Fairly. As with all long journeys, where to start and getting started is often a difficult step, particularly where not all organisations see this as a top priority.
I see two levels of change. First is the culture of the adviser firm. Embedding the need for everyone in the organisation to consider how their role and function impacts vulnerable customers and how they logically need to adapt to ensure the appropriate support and considerations are in place.
Changing culture is never easy but vulnerability requires a rebrand from its external focus on clients. It’s people who are vulnerable and that includes us and our friends, contacts and colleagues in the wider industry. While we work in the sector, we are all customers of financial services too. I’m also willing to bet that over the last few months, we or someone we know have all met the criteria of vulnerability and found interaction with financial services difficult. We are therefore in a great position to tap into people’s empathy around how we would like financial services to work better, particularly when the need for that extra bit of help and support is in play.
The second level is more practical, driven by people, process and technology. How do you identify all the changes needed throughout your firm, especially a large one, and make them happen? That is a complex question for any transformation activity, and one which requires a comprehensive model of the business to ensure nothing gets forgotten.
By analysing the people, process and technology that supports the delivery of those capabilities, advisers can identify the different capabilities needed to serve the needs of vulnerable customers and meet the regulator’s agenda.