"Looking to the FCA’s business plan, besides its ongoing objectives there are three major commitments going into 2025, the second of which is to put customer needs first."
Looking back on 2024, one thing is clear, and that is just how complicated vulnerability is. And whilst there’s some good work being done, not everyone’s on the same page when it comes to getting vulnerability right. Ultimately some sectors are doing better than others of course, and – astonishing as it might sound – there are still some firms doing nothing at all. Those that are trying have spent a considerable amount of time and money putting their own processes together, and none that I have witnessed have been perfected yet. Likewise, the fact that everyone is finding their own solutions to address this shared problem only adds to the complexity. For instance, a mortgage broker, a lender, and a protection provider will all require a customer going through the distribution chain to complete their own unique vulnerability checks. For the sake of that customer, it would be a positive step, in the future, to join everything up.
Broadly speaking, most firms are heading in the right general direction, and there’s undoubtedly some recognition of that from the FCA. What many are still lacking, though, is the depth of thought, the rigorous reporting based on systematic data and the clinical oversight that is required to truly identify all vulnerable circumstances and get closer to that perfect end state.
2024 saw significant effort put into determining what it means to support vulnerable customers in the way the FCA expects. Now that much of that work has been done, the FCA itself has said that it wants a collaborative relationship with the industry. While this may be frustrating for some, it strikes me as a shrewd move on the part of the regulator. By letting the issues breathe and waiting to see how the industry rises to the various challenges, the FCA now has a strong foundation with which to move forward.
Looking to the FCA’s business plan, besides its ongoing objectives there are three major commitments going into 2025, the second of which is to put customer needs first. As such, this is a major part – an entire third – of the regulator’s strategy for next year. And while this commitment doesn’t just refer to vulnerable customers, ensuring higher standards through Consumer Duty will undoubtedly be a priority. There will also be a review in the spring of firms’ treatment of customers in vulnerable circumstances. Going forward there will be not one single consultation from the FCA that doesn’t mention identification, communication and ensuring good outcomes for vulnerable people.
The regulator has certainly issued some remarkably large fines this year. We should be mindful though that these fines have not solely been driven by an investigation into those firms’ vulnerability processes. Instead, they have originated with a complaint or a forbearance check, with the end result being that the firm was penalised for not adequately supporting its vulnerable clients as well.
I think as we move into 2025 any review or investigation will take vulnerability into consideration, and if an issue is found I expect there will be substantial fines. With this in mind firms across all sectors must have processes in place to identify and ensure vulnerable customers receive just as good an outcome as anyone else. It may be that we can expect a small amount of leeway next year – dare I say it. If the upcoming review of firms’ treatment of customers in vulnerable circumstances finds evidence of bad practice, I imagine the firm will be warned, and required to fix the wrong, rather than immediately fined. But with sanctions materialising soon after for firms that don’t act on those fair warnings.
From larger fines to closer investigations, things are definitely ratcheting up and will continue to do so next year. In short, this issue is here to stay. Firms have to get on top of vulnerability, and they have to keep constantly improving on their processes.
Identification, action and reporting. That is the process that all firms must have in place going into 2025. And to those that are struggling to develop their own systems, the truth is that there’s a simpler, cheaper and – frankly – better way of doing it. A digital assessment, capable of accurately identifying financially vulnerable customers, removing subjectivity from the process and ensuring consistency across a whole client base, is arguably the only way to ensure all vulnerability drivers are constantly in scope. By combining clinical expertise with hard data, they’re able to reassure firms that their systems and controls will adequately meet the scrutiny of regulatory requirements.
So rather than reinventing the wheel in 2025, I recommend that firms have a wheel that works – and one that will deliver the good outcomes that all their clients deserve.
