Supporting Vulnerable Customers: Key Insights from the FCA’s Review and How Firms Can Respond

The FCA has published its long-awaited findings from the multi-firm review on how firms are supporting customers in vulnerable circumstances and whether their existing guidance remains effective.

This comprehensive review highlights the progress firms have made and identifies further areas for improvement to ensure that all customers receive fair and supportive treatment.

The FCA’s goal with these findings is to work collaboratively with firms to drive continued improvements in practice and outcomes.

Key Findings

Positive Developments:

• Many firms have made commendable progress in supporting customers in vulnerable circumstances, with noticeable improvements in attitudes, cultures, and practices.
• The Consumer Duty has reinforced the focus on achieving positive outcomes for these customers.

Areas Needing Attention:

• There is a need for enhanced monitoring of customer outcomes, particularly in relation to products and services.
• Customers with multiple vulnerability characteristics may not always receive the same favourable outcomes as other consumers.

Impact of the FCA’s Guidance:

• The Guidance has effectively shaped firms’ approaches by providing clear definitions and characteristics of vulnerability.
• Firms have found the Guidance valuable, but there is a suggestion for additional case studies and further guidance on data-monitoring methods, as well as handling non-disclosing vulnerable customers.
• The Guidance and the Consumer Duty are viewed as complementary, with strong support for maintaining the Guidance as a separate resource.

Good and Poor Practices

As with other recent reviews, the FCA has published several specific examples of good practice and areas for improvement. Key highlights include:

Good Practices Identified:

• Clearly Define Good Outcomes: Firms that effectively monitor outcomes for customers in vulnerable circumstances clearly define what constitutes a good outcome for their products or services.
• Use High-Quality Data: Collecting relevant data to make evidence-based assessments enables firms to understand whether they are delivering good outcomes.
• Escalate Issues and Take Action to Improve Outcomes: Proactively reviewing customer experiences and outcomes, with clear escalation processes and strategies for making improvements.
• Senior Leadership Engagement: Senior leadership’s active involvement in reviewing governance arrangements, processes, and systems to ensure positive outcomes for vulnerable customers.
• Tailored Consumer Support: Providing flexible, tailored support that meets customers’ needs, including adapting standard processes where necessary.
• Identification and Disclosure: Using systems and AI to identify signs of vulnerability and encourage customers to disclose their needs.
• Skills and Capability of Staff: Training staff to recognize and respond to vulnerability, while also providing internal guidance and managing staff wellbeing.
• Testing and Reviewing Communications: Using consumer testing or third-party reviews to assess and improve the clarity and effectiveness of communications.

Areas for Improvement:

• Clarity on Good and Poor Outcomes: Firms need to define more clearly what constitutes good and poor outcomes.
• Quality and Breadth of Data: Many firms rely on data that lacks sufficient breadth and granularity, limiting their ability to understand and compare outcomes for different groups.
• Escalation Processes: Firms should establish clearer policies and processes for escalating issues and taking action based on outcomes monitoring.
• Consistency in Providing Clear Information: Communications should be clear and written in plain language, avoiding jargon.
• Timeliness of Communications: Timely communications are necessary to provide consumers with enough time to make informed decisions.
• Tailoring Communications: Communications should be tailored to meet the needs of customers in vulnerable circumstances, with appropriate channels offered.
• Training Product and Service Design Staff: More training is needed for staff involved in product and service design to understand the impact of their work on vulnerable customers.
• Designing for Vulnerable Customers: Firms should demonstrate how they are designing products and services to address the needs of vulnerable customers.
• Using Data in Product Design: Data and insights on vulnerability should be incorporated into product design and review processes.

What Firms Need to Do

Adopt Good Practices:
Utilise the FCA’s examples of good practices and areas for improvement to refine your approach to supporting vulnerable customers.

Strengthen Outcomes Monitoring:
Develop and implement robust methods to monitor and measure outcomes for customers in vulnerable circumstances.

Commit to Continuous Improvement:
Engage with industry feedback and initiatives to continuously enhance your practices, particularly in challenging areas.

Leverage the Guidance:
Apply the Guidance to better understand and meet expectations under the Principles for Businesses, ensuring clarity on vulnerability drivers and characteristics.

Firms should integrate these insights and actions into their operations to drive continuous improvement. The FCA has committed to supporting firms on this journey and will continue engaging with the industry to foster ongoing progress.

Conclusion:

By taking the necessary actions, firms can ensure fair and supportive treatment for all customers, especially those in vulnerable circumstances. Through these efforts, we can contribute to creating a more inclusive and supportive financial environment.

How We Can Help

There is a lot to consider in the findings from this review, and the FCA is likely to want to understand the actions firms have taken in response. Should you need help further developing and implementing your approach to managing practices related to vulnerable customers, or in interpreting the guidance and how it may impact your firm, please contact Padda. We are happy to discuss how we can assist you in refining your approach.