How financial services firms can improve support for vulnerable customers and drive good customer outcomes

The current uncertain economic environment, combined with an ageing population, means that firms must go further in their approach to assessing and supporting vulnerable customers. This is an opportunity not just to support existing vulnerable customers, but to innovate and provide products and services that are inclusive for the different needs of different segments of the population. Inclusive design is a key stepping-stone on firms’ journeys to becoming more customer centric.

The Financial Conduct Authority (FCA) has been clear in their 2024/25 Business Plan that vulnerability is still at the heart of their work. This is complementary to the Consumer Duty’s specific rules on vulnerability, that the regulator has stated they have enhanced regulatory expectations of firms’ treatment of vulnerable customers. The FCA intends to use these enhanced standards to understand the challenges firms face in consistently delivering good outcomes for vulnerable customers.

The FCA’s upcoming post-implementation review on vulnerable customers is intended to do just that, particularly as firms close their Consumer Duty Day 2 programmes and move efforts to business as usual. Firms will need to be prepared for the regulator’s review on the effectiveness of implementation of the Guidance on the Fair Treatment of Vulnerable Customers (FG21/1), and how this has impacted on outcomes for customers in vulnerable circumstances. Detailed timings of this review have not yet been publicised but the final report is due to be published by the end of 2024. This will occur alongside a renewed focus on operational resilience where vulnerable customers are a critical consideration, and the further work around customers in financial difficulty, including persistent debt, which were laid out in the 2024/25 Business Plan. 

There are several common challenges firms should direct their attention to

Our work with financial services firms has given us a greater insight into the themes that firms are currently tackling as part of their implementation of Consumer Duty and subsequent identification of gaps in their vulnerability approach. These align with the FCA’s feedback on areas for improvement and our key observations across firms include challenges with:

• Ongoing outcomes monitoring of products, services and processes to understand outcomes for customers in vulnerable circumstances
• Establishing effective controls including internal communications to properly share and record vulnerability information across teams and channels consistently in order to mitigate harms
• Aligning policies and practices across multiple sources of regulatory guidance including the Consumer Duty, vulnerability guidance and sector-specific handbooks
• Driving improvement to deliver good outcomes at the post-sale stage including customer support, (for example processes around Power of Attorney or Court of Protection orders), claims handling and complaints
• Ensuring appropriate capabilities and competencies of people as well as adequate training, tools and frameworks to improve vulnerability identification and support beyond express customer statements.

The root of these challenges stems from an approach that regards vulnerability as the exception rather than a customer segment that could, at any time, make up roughly half of the UK’s adult population. This results in a proliferation of exception processes tacked on as an afterthought, which can be incongruous to the main customer journey. Firms who move towards an approach that harnesses inclusive design to build better products and services would see benefits for all customers regardless of vulnerability.

Ahead of the extensive work around vulnerable customers the FCA has planned for 2024/25, including regulatory engagement on the FCA’s post-implementation review, Financial Inclusion Tech Sprint, publication of final Borrowers in Financial Difficulty rules, and review of debt advice rules for vulnerable customers, firms should take the opportunity to review their approach to vulnerability. We recommend firms begin by taking stock of their existing position and identifying future ambitions:

1. Engage your senior leadership team to champion and drive change from the top

Gather your senior leadership and ask: How well does your existing approach meet the needs of your vulnerable customers? Firms should be frank and realistic – many firms are likely to have done considerable work in this space, but blind spots and inconsistencies are inevitable. We’ve seen this work well where a full drains up review results in vulnerability being a standard item

2. Set your ambition for the future

Assess the impact this ambition will have on your future strategy, products, services and your customers. We recommend firms undertake assessments of maturity and traceability against regulatory requirements, review operating models to optimise processes and strengthen governance, and utilise inclusive design practices and methodologies.. Undertaking these activities should provide your business with a view of where you want to get to and how to get there. Prioritisation of activities is critical to take action that will evidence that vulnerable customers are receiving outcomes as good as other customers, in line with the latest FCA feedback.

3. Review your approach to identifying and supporting vulnerability

Starting with your process for identification, determine whether your assessment processes are comprehensive, clear, and broad enough to account for different types of vulnerability. If you have already undertaken the exercise of identifying Important Business Services as part of the implementation of operational resilience in 2022, you should have already mapped out your service processes and this can support with identifying the points in the customer journey where vulnerable customers could be particularly impacted, or where you could provide additional support.

Assess your customer journeys to revisit how vulnerable customers are managed at key touchpoints. Focus on ensuring alignment between pre- and post-sale support and information sharing internally as well as across your distribution chains. Prioritisation should be informed by areas where foreseeable harm is greatest.

4. Review your policies and procedures for alignment against regulatory guidance and requirements.

You should ensure that your policies and frameworks reflect regulatory requirements across regulatory rulebooks as well guidance on vulnerability, including good practice that the FCA has shared following their Consumer Duty review of firms’ implementation plans.

Evaluate whether you have a consistency in approach, governance and reporting across your different business areas.

5. Review governance around vulnerability through the lens of understanding outcomes for customers in vulnerable circumstances and how they compare against non-vulnerable customers.

Firms should leverage the additional data and research they will have undertaken on target market to support identification of customer needs. The FCA has continued to highlight in the 2024/25 Business Plan the important of gathering and utilising data to support decision making and good customer outcomes. Many firms do not gather or analyse specific vulnerable customer data, so further work in this area is recommended.

6. Review training and guidance to frontline staff

Your frontline staff are often the only part of your firm that customers will have any contact with, they are critical to identifying, engaging with, and supporting vulnerable customers. Their ability to do these three activities can be the difference between significant harm to the customer and reputational damage, or a good customer outcome where they receive everything they need. Understanding whether colleagues have the support they need to appropriately identify and manage vulnerable customers, particularly concerning identifying customer needs, tailoring support and record keeping, should be a top priority for all firms.

There is increased scrutiny on Executive teams and Boards – when did you last hear directly from a customer?

From our work with firms across the market, we have seen an increased expectation on leadership teams to not only be aware of topics such as vulnerable customers, but actively support change to deliver good outcomes for them. Senior leaders can become detached from the realities of the challenges for their customers and their people who are supporting them. With the upcoming deadline for the first annual Consumer Duty Board report on 31 July 2024, the FCA will be looking to firms’ Board reports to evidence the ongoing work firms are doing to continually drive good customer outcomes, including for those with vulnerability. Firms should be ready to show that this is a topic that is regularly discussed and monitored at the most senior levels. Consideration of vulnerability needs to be fully embedded from top to bottom through every firm.