DEFINITION OF VULNERABILITY

The Financial Conduct Authority (FCA) has developed the following definition to guide work in this area:

“A vulnerable consumer to be someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”

Vulnerability is a spectrum of risk and occurs in a variety of ways which may be permanent, temporary, or even sporadic, dependent on its nature.  In many circumstances, the individual may not recognise themselves as ‘vulnerable’.

We recognise that vulnerability may not be simply due to the situation of the consumer but caused or aggravated by the actions or processes of the firms they may deal with.

We recognise that clients who might be considered as being in vulnerable circumstances could include clients with:

1. mental capacity deficiencies (including language or communication), including mental illness and dementia;
2. stress or subject to financial shock of all types, such as employment concerns, bereavement (or potential bereavement), marital or relationship difficulties;
3. a physical impairment that may not allow them to engage with automated, or other standard process requirements (such as photographic ID, phone key pad recognition, or internet applications);
4. severe and long-term illness (both life-limiting and where recovery is expected);
5. little or no financial experience or have no access to mainstream financial services;
6. low income;
7. an existing distressed financial situation;
8. responsibilities for others, such as ‘carers’ or acting as power of attorney;
9. no access to the internet or other digital media;
10. poor language skills.
11. a general vulnerability due to being aged 75 and over or aged 18 years and under

As a firm we must remain mindful of the potential for enquiry by these clients and the potential for any change of circumstance in respect of existing customers.

IDENTIFICATION OF CLIENTS IN VULNERABLE CIRCUMSTANCES

Vulnerability is broad and may occur at any time.  It will usually involve the interplay of characteristics of the individual, their circumstances, and static or transitory status.

We only deal with customers in vulnerable circumstances where we are aware of their needs:

1. mental capacity deficiencies – the FCA provides clear guidance on the identification of mental capacity limitation issues in their Handbook.
2. stress or financial shock – may be identifiable (facial expression, posture or stance etc.), but otherwise may be revealed through conversation before and during interview
3. physical impairment – may be identified visually, or through interview
4. severe and long-term illness – may be identifiable through conversation or through interview
5. financial inexperience – may be identified through the factfind process and their credit profile
6. low income – may be identified through interview and credit profile
7. in financial distress – may be identified through interview and credit profile
8. carers – may be identified through interview or conversation
9. digital exclusion – identifiable through interview or via routes of engagement (or non-engagement) with the firm
10. poor language skills – may be audible or identifiable via routes of engagement with firm
11. clients aged 75 and over or clients aged 18 years and under – should be offered the opportunity to have a relative or friend accompany the client to a meeting

The nature of the need area to be addressed may also indicate vulnerability.  For example, people wanting to arrange:

• Pension Sharing Orders
• Financial implications of divorce advice
• Investing (redundancy monies) for replacement income
• At retirement planning
• An equity release product
• Right-to-buy
• A first-time buyer mortgage
• Debt consolidation or further credit
• Debt management
• The provision of long-term care
• Excessive monetary withdrawals from investments

These could be some indicators of vulnerability but this is not designed as an exhaustive list. In the circumstances that apply to our firm we will apply additional safeguards, as appropriate, to ensure fair treatment. This will apply to each individual but where we identify groups of the same people we may establish a process aligned to the needs and circumstances of that group.

ASSESSMENT AND MANAGEMENT OF RISK

Just because somebody is vulnerable does not automatically mean that they are unsuitable for the

advice and services our firm supplies. As soon we think we may be engaging with a vulnerable consumer we will make a record of this and ensure we adhere to this policy.

When speaking to the vulnerable consumer, we will: 

• Provide additional opportunities for the customer to ask questions about the information we have provided.
• Continuously seek confirmation that they have understood the information that has been provided.
• Ask if there is anybody with them who is able to assist them, and offer & encourage them the opportunity to have a family member or friend present during the conversation. If an informal chaperone is not available, we should always welcome the involvement of professional chaperone, for example, a family lawyer when advising about pension sharing orders.

We will not discriminate against clients in vulnerable circumstances. Where the vulnerability is mutually recognised we will only adjust our fees where our services require extra resource to treat the client fairly. Any additional costs will not seek to profiteer from the situation and will be fully disclosed to the client before any subsequent work is carried out.

Where we feel we do not have the expertise to deal with the client due to their personal situation we will make every attempt to refer them to another firm or third party for the appropriate level of support to be provided.

Measurement of risk

To be effective, all policies need ‘measurement’: Our methodologies for the measuring the effectiveness of our vulnerable persons policy will be subject to continuous improvement as we develop policy and practices. Measurement tools include (but are not limited to):

• Client retention
• Complaints data
• Persistency of recommended solutions
• Treating Customer’s Fairly satisfaction data

Understanding the benefits to our firm

Supporting customers and clients who are in a vulnerable position is not just a regulatory but is also a moral responsibility. We intend to fulfil our duties in this area and as a firm we see the benefits in adopting the right approach. These include:

• Reduction in complaints
• Greater client satisfaction
• Engagement from a particular client set
• Reputational benefits
• Good publicity
• Improvement of overall “culture”

We will review our practices periodically for consistency and to determine adherence to the stated policy.

The following table illustrates mitigating actions for clients with mental capacity deficiencies (for the avoidance of confusion “competent person” means an individual without the limitation presented by the client):

RIGHTS & RESPONSIBILITIES

Our responsibilities:

• To abide by the FCA’s principles and rules in this area

      FCA Principles for Business 2,3,6,7 & 9;

      TCF Outcomes 1,2 & 4;

      Conduct of Business Rules;

      DEPP 6.5A.2 (calculation of enforcement fines);

      Senior Manager Conduct Rules;

      Individual Conduct Rules.

• To ensure staff are aware of this policy and are adequately trained to identify and deal with clients who are or may appear “vulnerable”
• To support individuals in relation to identified risk and vulnerability
• To provide means of reporting any instance where they believe that a client might be in vulnerable circumstances

Responsibilities of our team:

• To be familiar with this policy and procedures, and be able to recognise where additional support or sign-posting to other agencies may be required
• To take appropriate action in line with this policy
• To report any instance where they believe that a client might be in a vulnerable circumstance, and act accordingly in line with the policy
• To undertake annual training as prescribed by the company to maintain and improve vulnerability awareness.

Identification of and treatment of vulnerable clients – Client Evaluation

The table below sets out our approach to dealing with all individuals and help us to determine their circumstances and if they are in a permanent or temporary vulnerable situation. These guidelines will be distributed to all staff and each will be trained on the areas relevant to their role.

All clients will be assessed, as a minimum, against the following criteria. This is in addition to any processes we have in place for different vulnerability groups;

Vulnerable Persons Policy v1.3