Are we missing the point about Vulnerable Clients? - Organised You
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Are we missing the point about Vulnerable Clients?

A header for the blog post on the subject of Vulnerable Clients.

Are we missing the point about Vulnerable Clients?

Vulnerable clients have been a hot topic since the role out of Consumer Duty in July 2023. As an industry we all agree with the requirement  to ensure that we’re responding to vulnerable client needs appropriately.

However, I have had some experiences this month that have left me wondering.  Are we missing the point about vulnerable clients?

Vulnerability Targets?

In February I attended a compliance audit with one of my directly authorised clients. This client has approximately 50 clients whom he has been looking after for a number of years. His business is predominately service based, rather than new business orientated. The adviser confirmed during the audit that he has assess all his clients and does not consider any of them to be Vulnerable.

The auditor in attendance advised that, due to the ‘expected percentage of vulnerable clients‘ identified by the FCA, it was unlikely that the Adviser would have no vulnerable clients. The adherence to client vulnerability processes would therefore be marked as an amber point on his compliance audit report.

To be clear, if the Adviser had simply indicated that one of his clients was vulnerable, even if he didn’t believe that to be true, this section of the report would have been green.

Default Vulnerability?

I received a client file back from an external review firm this month for a first time buyer mortgage case. The review report stated that the client should be classed as Vulnerable by default, as a first time buyer.

Is it fair to say that all first time buyers are vulnerable clients?

For me there is a real difference between:

  • Adapting a new business process to take into account different client types. E.G. Ensuring extra time is spent going through how mortgages work and the risks involved with first time buyers. And;
  • Treating a client as Vulnerable and personalising a process to deal with their vulnerability.

Making Vulnerability a process.

I understand the industry’s desire to make a process out of identifying client vulnerability. There is an underlying fear of not being able to tick the right boxes and demonstrate that we’re meeting regulatory requirements. Firms find comfort in being able to demonstrate a process that;

  • presumes certain client types are vulnerable
  • applies a set different ‘vulnerable client’ approach for these clients.

However, to me, identifying a client vulnerability should be an extension of what we already do as part of knowing our clients.

If you are assessing your clients on a personal, client by client basis, then real vulnerabilities will be clear and obvious to you. Ensure that your client files tell the story of what you’ve identified personally for this client and how you’ve adapted the way you work with them accordingly and I am certain you will have provided a far better service for your clients than if you had put them in a default vulnerability box.

What do you think?

Is a process driven approach to vulnerability the only way it can be implemented effectively? Can Advisers still demonstrate that they’re meeting all the regulatory requirements and give an excellent service to the Vulnerable clients, just by treating their clients as individuals and maintaining excellent client files? We would love to hear your thoughts.

Karlene Rivers
karlene@organisedyou.com