According to the UK’s Financial Conduct Authority’s Occasional Paper No. 8, a vulnerable client is an individual “who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”
Vulnerability per se comes in all shapes, sizes, and colours.
Being vulnerable is something fluid in nature, as it can occur on a temporary, occasional, or permanent basis.
Furthermore, firms might play a role in making their own clients vulnerable. A firm’s actions, procedures, or modus operandi can cause or exacerbate a customer’s level of vulnerability.
With all of these factors to consider, it is imperative for firms to know how to handle and manage vulnerable clients, and act in ways that will not generate or amplify vulnerability among their clientele.
Defining Vulnerable Clients
A vulnerable consumer is one who may be easily harmed or hurt as a result of his or her personal circumstances or conditions.
As explained by the FCA, “consumers in vulnerable circumstances…may be significantly less able to represent their own interests, and more likely to suffer harm than the average consumer.”
Vulnerability can be based on any of the following:
- Being socially or financially excluded
- Gender such as transgender or female in certain spaces
- Sexual orientation
- Race
- Religion
- An inability to speak English properly
- A poor or weak credit history
- Learning or speech difficulties
- Remote living that leads to little access to society
- Single parenting
More specifically, vulnerability can be caused by:
- Health Conditions or Illnesses that hinder a person’s ability to complete daily tasks and function in a relatively normal way. According to industry statistics, 5 percent of UK citizens claim that disease or other ailments negatively affect their ability to perform everyday tasks. This may include old age, accidents or injuries, mental health problems, and terminal or critical illness.
- A general lack of Resilience, which makes it difficult for individuals to deal with financial or emotional shocks. Stats show that 30 percent of individuals in the UK suffer from a low level of financial resilience.
- Major Life Events such as the death of a close one, divorce, break-up, or the loss of one’s job might make an individual vulnerable. 19% of consumers throughout the UK claim an event that would qualify as major occurred to them or someone close to them during the last year.
- A lack of Capability when dealing with financial matters or Low Confidence when managing bank accounts and funds. In the UK, close to 17% of the adult population are deemed to have such lack of capability in financial dealings.
In any case, the list of potential causes of vulnerability is endless. Under each category listed above, there might be a myriad of other sub-causes that might lead to vulnerability.
How to Best Manage Vulnerable Clients
There are several things that both employees and firms can do to handle vulnerable clients in a better way. Below we will highlight some of them.
Employees
There are plenty of actions that can be taken by employees to look after the wellbeing of their vulnerable clients.
First, employees must comply with the firm’s policies and procedures. This should not stop them, however, from raising their voice in instances where they see that a specific vulnerability is not being addressed.
Second, staff members should constantly review the company’s products and services to make sure that they do not hinder vulnerable groups or put them at a disadvantage. If there are gaps and exposures, employees should do their best to curtail or eliminate those before they affect a vulnerable client.
The fact is that companies can only handle vulnerability if they know about it, and employees play a fundamental role in identifying when and where there are problematic areas.
Third, employees should always rely on their own experiences. Most individuals have gone through periods of vulnerability—whether temporary, sporadic, or permanent—and employees should hark back on these to help them look after and protect those who are vulnerable.
Additionally, by interacting with clients, employees have direct access to how individuals react, speak, pick their words and phrases, etc. All of this insight, in turn, will transform employees into supporters or backers of those who are vulnerable.
Firms
Generally speaking, companies must ensure that their products, services, and employees can pinpoint where and when vulnerability happens and be able to deal with or manage it without exacerbating the situation.
Some of the key areas where firms can act when it comes to looking after or protecting their vulnerable clients include:
Policies: Setting clear and concise definitions of vulnerability and vulnerable clients within the context of their business and defining what needs to be done to better cater to these individuals.
Systems: Developing systems and processes that remain flexible and can look after the needs and preferences of vulnerable clients.
Products and Services: Creating or offering products and services that are suitable for everyone and do not discriminate against those that are vulnerable. These should be as flexible as possible so that they can adapt to what is best for the vulnerable clients.
Implementation: Establishing and implementing a strong, transparent, and consistent (yet flexible) set of policies and procedures that aim protect vulnerable clients. Also, any action taken by a company should be proactive and not reactive in nature.
If you’re interested in delving deeper into what it takes to manage vulnerable clients, LGCA has just released a new course on this exact topic.
You can purchase the course on LGCA’s e-shop or click here for direct access.