New vulnerability checklist launches to help firms meet Consumer Duty requirements

The FCA recently launched a review innto how firms approach and treat customers in vulnerable circumstances.

Related topics:  Finance News,  Regulation
Rozi Jones | Editor, Barcadia Media Limited
28th March 2024
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"In practice, few firms meet all the above requirements, especially when it comes to reporting and monitoring."
- Andrew Gething, managing director of MorganAsh

MorganAsh has published a 10-point checklist to help firms meet the vulnerability requirements of Consumer Duty.

It follows the recent announcement by the FCA confirming it will begin to review how firms approach and treat customers in vulnerable circumstances. Consumer vulnerability is a key pillar of Consumer Duty, requiring firms to not only identify and monitor vulnerable customers throughout the lifetime of products, but ensure they receive outcomes no worse than the resilient.

The checklist includes key considerations such as the assessment of all customers – rather than just subsets – and all vulnerabilities – instead of purely financial. It also covers any provision for protected characteristics, such as age, gender and sexual orientation, as well how firms respond to the monitoring and reporting requirements - with board reports needing to be ready for July.

10-point checklist

1. Do you have easy-to-access processes to allow customers to disclose vulnerabilities?
2. Are you assessing for all vulnerabilities – health and life events – as well as financial wealth?
3. Are you attempting to proactively assess all customers, not a subset (such as those who phone in, claim or default)?
4. Do you wait for customers to volunteer that they are vulnerable or self-identify a vulnerability?
5. Are your advisers/agents assessing vulnerability?
6. Are you recording those with protected characteristics, to ensure they receive equitable outcomes, in accordance with the Equality Act?
7. Are you monitoring changes in vulnerabilities over the lifetime of a product?
8. Can you evidence how you act on identified vulnerabilities – for example, changing how you communicate, or amend your processes?
9. Can you evidence of all the above – using good quality, consistent data?
10. Will you be able to report, for July, on the outcomes received by vulnerable cohorts at board level (bereaved, divorced, those in debt, those with a life-limiting illness and so on) compared to the resilient?

In line with the FCA’s own findings, MorganAsh argues that if firms are reporting vulnerable customers in the single digits, that number is likely to be incorrect. Evidence, including the FCA’s Financial Lives survey, consistently shows that around 50% of UK adults are vulnerable in some way at any one time, and indeed all of us are vulnerable at some time during our lifetime.

Andrew Gething, managing director of MorganAsh, said: “Many firms are now realising that managing consumer vulnerability is trickier than they first thought - with assessments by individuals delivering inconsistent results and hence difficulty in providing good data for reporting. The checklist focuses on the common areas of weakness we have been discussing with the FCA and we expect to be high on their agenda with this review now underway.

“In practice, few firms meet all the above requirements, especially when it comes to reporting and monitoring. We recommend having plans in place to demonstrate progress and intent – as there is little excuse to be not assessing customers when interacting with them at point of sale or during annual reviews.

“It quickly becomes clear that good data and a clear process is essential in meeting the requirements of Consumer Duty. Vulnerability management software - such as MARS – is fundamental in making this easier for firms, all while keeping costs down and driving better client relationships.”

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