The FCA’s recent Vulnerability Review and its supporting webinar aimed to review firms’ treatment of customers in vulnerable circumstances. Speaking at the regulator's 'The Vulnerability Review: Findings and next steps' event, the FCA's director of consumer finance, Alison Walters, said while there had been good progress, there was still work to be done.
After reading the supporting communications, and especially after the webinar hosted by the FCA, it still felt that two key elements are being somewhat overlooked – identification and systematic data.
Let’s first look at the headline data presented in the FCA consumer research. Specifically, how just 4 in 10 vulnerable customers say they have disclosed their needs to their financial services provider. We would argue that this data is far from what’s reflected in reality. Our data, in fact, (from 175,000 real time assessments) shows the figure of disclosure to be much lower indeed. In short, very, very rarely do people self-report.
And that’s not really all too surprising... because the thing is, not only is there unfortunately a real stigma and sense of shame surrounding the prospect of being vulnerable, but it’s also entirely possible that the customer themselves might not even be aware that they’re at risk from a vulnerability in the first place. As such relying on customers to be open about a potential vulnerability (i.e., self-reporting) simply won’t work as a means to identify vulnerability.
What surprised us was the regulator putting the onus on the customer to self-report their vulnerability status. Rather we believe that the emphasis should be on the firms themselves to ensure good outcomes for their customers. And this means they need to get identification right up front - and have a systematic and robust process for doing so.
So much of the conversation during the FCA webinar focused on processes, training, and good outcomes (all of which are noteworthy), but let’s be realistic, none of this means anything if the firm doesn’t get the identification right up front. And to do this they need data. Good, quality data.
The regulator says: “Good practice: A small number of firms used data effectively to identify where customers in vulnerable circumstances were experiencing worse outcomes than others."
Access to good data – and using it correctly to identify vulnerable customers - is therefore a key area for improvement area for firms.
At least three of the webinar panel members bought up the issue of data without prompting, stating things like ‘we need more certain data’, and ‘we need better data collecting’. And we couldn’t agree more – because without it firms cannot identify vulnerable customers and subsequently cannot ensure good outcomes.
What firms need is a systematic process for screening all clients, with appropriate accommodations for the needs of those at risk. By combining clinical expertise with hard data, through a digital assessment, finance professionals can remove bias and subjectivity from the process, ensure consistency across their whole client base and be reassured that their systems will adequately meet the scrutiny of regulatory requirements.
Ultimately firms can only deliver the right outcomes if they can understand the vulnerability support requirements of every client, even if they don’t have any.
