The Financial Conduct Authority (FCA) are very concerned about the number of so called “vulnerable customers” in terms of the provision of financial service. The numbers have increased significantly as a result of lockdown. But what are vulnerable customers? Here are some facts and figures (based on the FCA’s Financial Lives Survey 2020):
- 46% of UK adults (over 18) display some vulnerable characteristics – that’s over 24 million.
- 7 million people have low financial resilience.
- 7 million are not able to cover their monthly expenses for more than three months.
- Nearly 25% of adults have seen their financial situation worsen as a result of lockdown.
There are four main drivers to vulnerability which are:
- Health (i.e., disability or mental health issues) affecting 6% of the population.
- Life Events (i.e., bereavement or loss of work) affecting 20%
- Resilience (i.e., low levels of savings, or debt issues) affecting 20%
- Capability (i.e., poor language or reading skills) affecting 21%
So, what can, and should advice do to help?
- Embed fair treatment into staff.
- Ensure staff have the ability to recognise vulnerability.
- Offer support to staff having to deal with clients in vulnerable circumstances.
The FCA’s own behaviour in response to vulnerable customers has been brought into question by the Treasury Select Committee’s report into the FCA’s failure to protect customers from the LCF mini bond collapse back in 2018/19.
The Select Committee heavily criticised the FCA for being too risk adverse and not intervening in the scheme earlier to protect customers.
So far the Financial Services Compensation Scheme (FSCS) has paid out over £57 million in compensation. The FCA has also faced a number of claims in relation to their failure to properly regulate the scheme.
Questions have been raised about the fitness of the FCA to operate since it has been found guilty of not implementing the same levels of control that it requires of its own authorised firms like ours.