Articles - The conundrum of vulnerable clients

The FCA mentions the words ‘vulnerability’ or ‘vulnerable’ 107 times in the 121 pages of final guidance on Consumer Duty, FG22/5, making it absolutely clear that regulated firms must ensure they can deliver the same good outcomes to these clients as they would to anyone else. Why is vulnerability such a big deal? The FCA definition of a vulnerable customer is "someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care."

 By Fiona Tait, Technical Director, Intelligent Pensions
 Most obviously, these individuals may be less able to spot potential scams, although these are often so sophisticated that nearly anyone, vulnerable or not, may become a victim. The scammers are of course well aware of this and do not scruple to exploit it. As an industry, and as genuine human beings, we must all do what we can to protect our clients and those we care for from this activity.

 Less obviously for those in financial services is the fact that much of what we do is based on ‘informed choice’, particularly in a pension landscape that is inexorably moving towards defined contributions. Financial professionals have a duty of care to ensure their members/clients are not making decisions which are detrimental to their own interests. This is a hard call at the best of times, but it is particularly difficult if there are additional communication or cognitive challenges to manage.

 Identifying vulnerability
 One of the issues is that vulnerability is not always obvious, particularly when dealing with mental and emotional factors.

 One of the key principles of the Mental Capacity Act 2005 (MCA2005) is that “A person must be assumed to have capacity unless it is established that he lacks capacity.” It is therefore necessary not just to identify potential vulnerability but, in some cases, also to evidence it. People are often unaware, or even resistant to the idea that they might be vulnerable.

 There is also a potential stigma to vulnerability, particularly when it involves mental capacity. The Vulnerability Taskforce (now part of the Consumer Duty Alliance) advises that we do not refer to individuals as vulnerable, but as ‘people in vulnerable circumstances’.

 It also goes without saying that financial professionals are not doctors and do not have the capability or qualifications to assess someone’s mental state. Even medical professionals may be able to diagnose specific conditions, but the majority cannot assess capacity. If a member or client is resistant to the idea that they may need support it is not for us to overrule them, our role is to identify potential signs and consider the support we can provide to offset any likely impact on our services.

 Indicators of vulnerability
 MCA 2005 is clear that making unwise decisions is not the same as being unable to make decisions. It may however form part of a pattern, and one of the advantages of having a regular financial adviser is that they can assess changes in a client’s behaviour over time. The ability to make clear decisions is often one of the first skills to go when people start to lose cognition, and early indicators would include:
 • If there is a decline in their basic oral or written skills
 • If they take noticeably longer to take on board and respond to information
 • If their attention span has significantly declined
 • If they are finding it difficult to clearly express their needs
 • If they are taking longer to make decisions and/or show more uncertainty

 None of these factors on their own should do more than raise the possibility of a need for additional support but taken together they could be significant.

 Additional support
 Vulnerable clients are not necessarily incapable. Even in cases of cognitive decline the early stages are usually gradual and can affect different types of decision differently. It is important therefore to offer solutions rather than worry about whether they are legally capable or not. An obvious route is to consider if it would be useful to include another family member in meetings, who might help with the interpretation of data or simply provide confidence by their presence.

 Communications are also key, not everyone is comfortable with emails and many struggle with jargon or tables of figures. It is essential that communications are fair, clear and not misleading for everyone, but special attention must be paid to the potentially vulnerable. The use of large print, special readers or more face to face contact can significantly improve understanding and subsequent decision-making.

 Remember we are human
 Above all, it is important to remember we are all human. The law might consider that capacity is a binary concept, but as humans we can assess the degree of assistance that is required. This is not about categorising people, it is about ensuring we are doing everything we can to support those who need it.

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