How to live and breathe better support for vulnerable later life lending customers

Following the introduction of Consumer Duty in July 2023, it is now a requirement for advisers to evidence why their advice results in a good outcome for their customer. That means working to understand how any vulnerabilities may affect what qualifies as a good customer outcome for your customers.

What exactly is vulnerability and what does it look like?

The Financial Conduct Authority (FCA) defines a vulnerable customer as “someone who, due to their personal circumstances, is especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care.”

Alongside this definition the FCA has identified 4 key drivers of vulnerability. These are listed below, with the characteristics associated with each driver:

- Health: Physical disability, severe or long-term illness, hearing or visual impairments, poor mental health, addiction, and low mental capacity or cognitive disabilities.
- Life events: Caring responsibilities, bereavement, income shock, relationship breakdown, domestic abuse, and retirement.
- Resilience: Low or erratic income, over-indebtedness, low savings, and low emotional resilience.
- Capability: Low knowledge or confidence in managing finances, poor literacy or numeracy skills, low English language skills, learning impairments, and no or low access to help and support.

Research by the FCA into vulnerability has found that in October 2020, 46% of UK adults (24.1 million people) had characteristics of vulnerability, meaning that across the demographic of later life lending, advisers will undoubtedly encounter clients who need support.

Given the numbers of people involved and the constantly shifting needs of individuals, the FCA suggests that advisers look to vulnerability as a spectrum with most customers requiring modest care from the outset.

This is a serious consideration for advisers, as the FCA has noted that at any given time 0.4% of all customers may be dealing with all four drivers of vulnerability at the same time. This highlights the need for empathic and transparent communication right through the customer journey.

Best practice: Speaking to vulnerable customers about their later life lending options

After recognising that a customer may be vulnerable, it’s essential to take the steps necessary to safeguard them. Depending on the severity or type of vulnerability, advisers will need to discern the best course of action for the customer – this also includes ending the process entirely in some cases.

In general, it is best to adopt a before, during and after approach to working with vulnerable customers.

Before:
• Use an assessment tool, such as Comentis, to ensure a further safeguard for your customer, making identifying any vulnerabilities easier.
• Make sure that any documentation has already been sent to the customer, letting them read through in their own time, digest the information and form questions before your initial meeting.
• Prepare for your appointment and communicate all details clearly to your customer.

During:
• Be open and honest with your customer and work to help support any vulnerabilities they may have, including bringing materials that account for physical disabilities (large font text for sight issues as an example).
• Keep the meeting as easy as possible for your customer, don’t rush through information and take regular breaks if needed. Also make it clear to the customer they can involve their family or someone they trust in the meetings.
• Get your customer’s consent to share their information with lenders and third parties where possible.

After:
• Just as at all prior stages, ensure that any follow up correspondence is as accessible as possible.
• If you are seriously worried about a customer, don’t be afraid to make referrals. Whether that be for other financial tools or in terms of personal safety, including contacting emergency services if need be.

Vulnerability through the lens of Consumer Duty

It is vital for advisers to prioritise a thorough understanding of their customers' well-being throughout the consultation process, evidencing this as they go. Vulnerability is not static. Advisers must remain mindful of their customer’s circumstances and communicate with them regularly, to determine whether the lending option advised on is still the right option, or if an alternative option might be more suitable for them.

Financial scams and coercion

A significant consideration that advisers must look towards is whether elderly customers are being led into decision making by others that do not suit their own needs.

Age UK has outlined previously that every 40 seconds an elderly person becomes a victim of fraud. It is essential that advisers look for key indicators, such as:

• A sudden loss of assets prompting the need for later life lending.
• Third parties involved who appear to be there for their own benefit.
• A recent history of strange or inappropriate transactions.
• A customer with unpaid bills, who by all accounts should find them affordable.

If you believe your customer is being coerced or defrauded, cease proceedings and notify the relevant parties: this may be your compliance department or line manager. If you work as an independent adviser, consider contacting social services or even the authorities where appropriate.

Conclusion

Vulnerability comes in multiple forms and often all at once with later life finance customers. With many driving factors that are ever shifting, advisers must remain vigilant to the bespoke circumstances of their customers.

Better decision making has become more pertinent than ever, meaning that advisers are responsible for finding the most suitable outcome for their customers, and then evidencing this appropriately.

Every interaction between advisers and their customers is a new opportunity to assess what lending solutions can have the best impact, providing the opportunity for bespoke customer-centric advice.