Just who exactly is vulnerable?

How was the summer for you? Did you enjoy it or did the introduction of Consumer Duty overshadow everything else? 

The cherry industry forum didn’t have a lull in August: advisers found plenty of topics to discuss, with Consumer Duty finding its way into many threads. In fact, the most popular thread last month related to the subject of vulnerable clients. 

In its ‘old’ Finalised Guidance FG21/1: “Guidance for firms on the fair treatment of vulnerable customers”, the FCA stated that 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.”

The regulator said that ensuring consumers have an appropriate degree of protection was central to its role and that this included protecting vulnerable consumers. “We want vulnerable consumers to experience outcomes as good as those for other consumers and for them to receive consistently fair treatment across the firms and sectors we regulate,” it added.

It appears that the FCA’s stance has now changed with Consumer Duty. In its ‘new’ Final Guidance, FG22/5, the regulator states: “We expect consumers with characteristics of vulnerability to benefit from the overall improvements in outcomes delivered as a result of the new Duty …”

The view now seems to be that vulnerability isn’t necessarily permanent, but instead can be temporary, due to one’s circumstances - meaning that literally anyone could be classed as vulnerable at some point in time.

However, while on the surface this may seem admirable, the prevailing opinion on cherry is that there could be many unintended consequences. In fact, if asked who exactly is vulnerable, I’d have to say that, to me, it appears that both advisers and consumers are at risk!

It’s disheartening to note that Consumer Duty and its stipulations might inadvertently produce the opposite of the desired outcome. Indeed, this situation reminds me very much of the issues arising post-RDR relating to pensions and investment advice. Sceptics might even be forgiven for thinking the regulator actually intends to restrict advice solely to high-income individuals and the property rich.  Surely not!  

Realistically, such an assumption is not correct.  It does, however, underscore the feeling that not enough forethought and consultation with frontline professionals was considered in setting out these changes. When will the decision-makers learn?

Thankfully, the resilient broker community often finds ways to navigate such challenges, consistently stepping up to aid all clients, irrespective of whether they’re classed as ‘vulnerable’ or not. Nevertheless, and despite this admirable fortitude, a concern remains: could these new regulations make advisers so apprehensive about potential repercussions that they feel forced to deny assistance to those most in need?  Comments on the forum suggest that there’s a genuine fear of advisers leaving the industry or even suffering health-wise because of the constant threat of potential claims. Expecting advisers to continue and thrive while continually feeling the strain of such apprehensions seems both unfair and unreasonable.

Also, isn’t the lack of uniformity here another concern?  For instance, while some fact-finding might not flag a client as vulnerable, others that take into account factors like low financial resilience, recent divorces, family deaths, or approaching retirement, certainly will. The range of what’s considered ’vulnerable’ can vary vastly, meaning that anywhere from 0% to 90%, depending on one’s interpretation, of people could be ‘vulnerable’. I mean…. realistically, how many clients genuinely maintain three months of expenses in savings? Not that many I suspect.  It all feels too confused and open to interpretation.

Feedback from within the adviser community substantiates these concerns. Comments in the cherry forums describe the situation as a "mess", and terms like "stupid" and "nanny state" have been used. The overwhelming sentiment seems to be one of dissatisfaction, frustration and fear.

These comments, however, must not be viewed as simple grievances – rather heartfelt appeals to those in authority: please take heed, properly understand the issues, and strive for better so called solutions in the future. The well-being of both the industry professionals and its consumers is at stake.