Customer Vulnerability

How to meet the needs of vulnerable customers

7 min read

We take our responsibility seriously when working with FS firms to ensure they can better meet the needs of customers, especially those who are vulnerable.  The FCA released a number of resources to help FS firms better identify vulnerable customers to ensure they’re treated fairly. As FS firms make more use of speech analytics technology, they can better meet the needs of their clients and provide clients with the best knowledge and expertise which will create a positive impact on the experience and the quality of service available to them.


We give you a better understanding of who is classed as vulnerable and what you can do to meet their needs…


So who is considered a vulnerable customer?

The FCA has defined a vulnerable customer as: 


“Someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”. 


Studies have shown that most people don’t identify themselves as being vulnerable, making vulnerability ever more difficult to recognise.  Further complexities also arise as vulnerability can be permanent, temporary or recurring, depending on circumstances. 


The FCA then goes on to identify four key drivers of vulnerability. These are; 


Health: This refers to disabilities or short-long terms illnesses that may affect an individual’s ability to carry out day-to-day activities. 

Life events: This touches on major life events such as death, a job loss, or a relationship breakdown i.e. divorce. 

Resilience: This makes reference to the low ability of an individual to withstand financial or emotional shocks. 

Capability: This alludes to limited knowledge of financial matters or having low confidence in managing money. This also includes low capability in areas such as digital or literacy skills. 


The role of the FCA and FS firms 

The FCA has set out guidelines on how FS firms must conduct themselves and ensure they protect their clients. Their role is to supervise and monitor firms to ensure they meet the standards they set out and if FS firms do not comply, they intervene. They do this by imposing penalties, preventing trading or securing compensation for consumers. They also ensure consumers receive the correct information to make informed decisions. And over the last few years, the FCA has brought more regulations to ensure vulnerable consumers are treated fairly and better protected in the financial system. 


FS firms have always been keen to assist their clients in vulnerable situations. However, firms are often unaware of how to set up a common approach. A report by More2life, states that 84% of advisers recognise that at-risk clients are one of their biggest priorities, and are aware that it is important to have an understanding of this. However, many advisers struggle to identify subtle signs of consumers who are more likely to be exposed. As this issue is complex, it has become increasingly difficult for advisers to use the right techniques to identify such clients. 


Though FS firms have been active in supporting clients, not enough has been done. There has been failure to provide clients with clear explanations leading to a lack of communication. This correlates with poor frontline interaction and clients feeling they have not been heard. Although technological innovation has been introduced to empower vulnerable consumers, it has also led to digital exclusion. There is also criticism of rigid product design and service structures. Therefore, we must look forward and take these considerations into account as well as look at the current economic environment and make changes to support those who need it now more than ever. 


The Present

Since the start of the COVID-19 outbreak in the UK, intelligence analysts have seen an escalation in criminal gangs creating scams, many of them targeting elderly people who have been self-isolating.  The FT Advisor reported, more than 900,000 spam messages had been discovered in the first 4 months of 2020, all of which mentioned coronavirus.  It is likely we will see a further increase in cybercrime in the near future. Vulnerabilities associated with working from home and the potential from financial benefit will see criminals continue to increase their activities and create more advanced and sophisticated methods to take advantage of people. By introducing new technologies, we can combat these challenges. AI capabilities can help to manage risk as well as increase productivity. AI is also being applied to customer due diligence using natural language processing (NLP). By implementing technology, FS firms will be able to reduce financial risk as well as provide a better service to all.


We see FS firms are up against a challenging backdrop. This requires them to make a sound assessment of vulnerability as well as the affordability of their clients. This also requires a  full understanding of the customer’s current circumstances as well as their financial exposures. That means finding out how much debt they owe across multiple sources. Also, considering their affordability as well as their credit data.  This data will help FS firms better understand and access a clients personal circumstances, it will make them more aware of what product/services to sell and when. This will improve transparency between clients and FS firms to create healthy dialogue and make a better judgement of what is appropriate for the consumer. 


What does the future of financial services hold for vulnerable people?

An individual can become financially vulnerable at any given time, just as anyone has the capability to improve their financial situation and leave this category. However, for some who face barriers to improved income, this can prove more difficult. For example, people with disabilities are faced with higher expenditure and are less likely to be employed than an able-bodied person. For such individuals, these barriers worsen financial vulnerability. Additionally, young people struggle to save, while older people who live in poverty, find it difficult to change their situation as retirement does not provide opportunities to work. With this in mind, implementation is underway by the FCA to seek out those in challenging situations and enforce regulation that will see many feel more valued as a consumer. 


Due to tighter restrictions from the FCA, those at risk will begin to enjoy fairer treatment. Due to improved technology that helps monitor and identify vulnerable situations, those at risk can be better served. Also, from the opposite spectrum, social care and charities are looking at financial services for their care for people as a key priority so help from a care and support perspective will begin to improve too.


Providing solutions to help those become financially resilient 

FS Firms must work towards creating spaces that meet the needs of a variety of people. This will help consumers make better choices and allow them to get access to the best product and services. This will also help empower them to be more proactive in asking for financial assistance. 


By facilitating new channels of communication consumers will become more familiar and comfortable with new options available to them. An example of this would be through the introduction of chatbots. The tool allows customers to manage their requests faster and more efficiently. They also act as a listening channel which can help to better understand customers. With each interaction, firms are able to learn more about their customers’ likes/dislikes, if there are changes in circumstances as well as what they may have planned for the future. By gathering this information, firms are able to offer personalised service and can suggest products/services that best suit their client’s situation. 


Improving the efficiency of customer service will help to resolve customer queries quicker. As well as this, human error is reduced which has a major impact on operational costs. By giving clients the option to use such a method of communication, it will give consumers the confidence to manage their financial decisions better. This will benefit customers as they will be offered a personalised experience and will ensure firms reach out to their clients at the right time, using the most effective channel. 


A strategy must be implemented that will ensure a consistent approach is used across all operations of the business. Staff should be provided with high-quality training, helping them identify vulnerable clients from the onboarding process. This will encourage conversations from the get-go and help individuals to share their circumstances when they speak to people who are well equipped to deal with vulnerable situations. As well as this, staff will be better informed to make better decisions as they will have more knowledge and expertise in these areas which will, in turn, improve customer satisfaction. 


Technology will assist in firms identifying vulnerable customers. Implementation of new technology will enhance customer experiences as well as automation which improves day-to-day operational efficiencies. Aveni has created Aveni Detect. Our risk monitoring solution quickly identifies customer vulnerability from the very moment a client reaches out. The software uses artificial intelligence (AI) and machine learning (ML) which helps FS institutions to better understand critical behavioural traits as well as trends. With this technology, FS firms have the ability to pick up on vulnerabilities as well as provide a safe environment for clients to be heard. This is the future of banking and FS firms need to invest in providing the best service possible to their clients. 


We must understand that one size does not fit all and that treating vulnerable clients is a process that takes time and effort. It’s crucial that financial institutions come together and support each other as well as their clients to make them feel heard, respected and valued. 


To learn more about how to protect your customers, check out our Aveni Detect Brochure 

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