How do different advisers approach vulnerable customers?

“My approach is in helping advisers to identify those client vulnerabilities, but also being able to potentially introduce and recommend more protection policies. I mean, that’s why we’re all pretty much here is it not, to try and encourage clients to take more protection, identify those opportunities? Now, I’ve seen a lot of firms that I’ve been coaching recently under a lot of pressure, either from their principals or from the networks to try and establish vulnerabilities in the majority of clients they come across because for whatever reason, whether it be in a network environment or within a firm environment, we’re being encouraged to identify those principles. And we’ve been told that the regulator would expect us to identify vulnerabilities. This can present a bit of a challenge, particularly those who are not as experienced in identifying what a vulnerable customer might look like.”

“I think it’s actually a little bit easier than you might think it is to spot a vulnerable customer. So vulnerability, of course, can be identified, as you quite rightly said a minute ago, Adam, across several categories, but none less important in my mind than the financial one. So, the truth of it is, pretty much every client that we speak to will have some degree of financial vulnerability.”

“We’re not really taught about money matters at school. How to manage or mismanage our finances. So in the case of most mortgages in particular, they’re going to have income vulnerability. See, very few people you speak to, if we’re talking about mortgage customers, are likely to have the right protection in place to meet even their basic financial needs. And so I would argue that the vast majority of people become financially vulnerable, right? If you’re not even able to support yourself in the event of an income shock, I would argue that’s a financial vulnerability.”

“So ironically, this early stage identification of income vulnerability, when you first start discussing with the customer and identify that vulnerability, it really opens up the door, in my opinion, to the protection conversation. It can make it much easier to discuss with clients, because the clients are much more likely to accept a recommendation that would make them apparently less vulnerable.”

“When the FCA started to really focus in and ask us the question around how we define our vulnerable customers and if we understood the nature and scale of vulnerability, we again had to hold our hands up and go, ‘actually, we still don’t have any idea of this’.”

“The fact that we still have some challenges, which I’ll touch on in a bit now in 2024, just shows you how big this is, but how important it is for our customers as well… What exactly is a vulnerable customer? And if someone tells me they’re vulnerable, do I panic? Do I grab a team manager? Or what exactly do I say to the customer to try and help them? And to add to that, we were using a number of legacy systems.”

“The first thing we decided to do, and I really felt passionate about, was changing our culture. This was something that was going to be with us for a long time, and it was going to be so important to our customers. So we had to make sure we had a risk noted on our risk system, that we had to make sure that customers and vulnerable circumstances were getting fair and good outcomes… There was an agenda point for vulnerable customers, and we had to start looking at how we supported our colleagues who were on the front line there, dealing with those customers on a day-to-day basis. The starting point was making sure that we could define what we meant by vulnerable customers. We’ll all probably be vulnerable at some point in our lives, even if it’s just for a very short period of time. And that’s the key to vulnerability. There are some vulnerabilities that will last with you through your whole life, perhaps serious ill health, a condition that you’re living with, that means that the normal things that we do day to day are more challenging for us, and that can lead us to feel a bit vulnerable.”

“One of the challenges they had, and I don’t know if this will resonate with people, is when someone said they were vulnerable, there was nowhere to record that. You know, it was just like a notepad on the system where you could put down, ‘Miss Smith was vulnerable’. This is what was happening, and it wasn’t shared anywhere, and it wasn’t able to be used in any meaningful way… So in terms of what we can do ourselves, we now have those really meaningful conversations with our customers to understand if they are feeling vulnerable and what their support needs are. And we have a lot of customer treatment strategies built around those support needs.”

“We started in 2015. We’re in 2024. I sometimes wonder, will we ever nail vulnerable customers? I’m not sure we will because life changes and circumstances change. We never thought we’d have a Covid pandemic. And what’s the next thing that’s around the corner without frightening you too much? So we always have to have a look at that.”

“Three years ago, when we were doing our annual assessment for the FCA to check that we were meeting the guidelines, one of those guidelines was about working in the distribution chain with advisers to make sure that our customers, through advisers, were getting the support they needed when they were in vulnerable circumstances. And it opened up huge debate about where the responsibility lies and how we work closely together and the passing of information. Is it right to try and get everything up front, or is it right to let the adviser do the best they can in their role and pass through to us, and we then pick up with an extra conversation to try and gather if there’s anything that’s going on. And to your point, do you then pass it back to the adviser?” 

“Some advisers are very receptive to that. And they’re going, that’s great. And others don’t seem that interested. And that’s the concern. And that’s maybe the barrier we need to break down and go. It’s important you know this and you know how to support this customer.”

“I wouldn’t tag people as vulnerable, but if you think there’s something there, think about the support they might need. So with the home-owner side of things, the first-time buyer, forget about the vulnerability side of it and think more about this person needs more support than that person because of the circumstances.”

“I think having that treatment strategy exactly around, you know, we expect someone from the age of, say, 22 to 30 to have much lower financial capabilities and financial experience than someone in their 50s. We then know that we need to be kind of working with them very differently than an older customer. That doesn’t necessarily equate to them being vulnerable, but it does mean that they don’t necessarily have that life experience to be making those decisions.”

“I’m sure we all know what the definition of a vulnerable customer is. It’s somebody who is susceptible to harm due to personal circumstances, and that can just be so wide. I looked at the FCA’s Financial Lives survey from 2022, um, where they looked at how many UK customers show characteristics of vulnerability, and it was 47%. So in terms of how clients can be vulnerable, what we can do?”

“I think it’s really, really important to be sensitive. In terms of how we approach this with clients. It’s about really doing our best to find them the best terms that we can.”

“Then on the financial side, Matt was talking about, during the fact find process really looking at where financial vulnerabilities are and being aware of that and explaining to the clients, you know, these are the risks to you. And this is why you do need kind of a different blend of products. Really helping them understand the value of the different products and how they protect the client in different ways.”

“Do you know when you’re doing your fact find if they got a high level of debt, particularly to the income ratio? These are things that we can look out for and bear in mind with clients and even then look to signpost them if we can.”

“I did do some research into the different providers and what they could offer to help. And there was a huge range across the providers of what they would and wouldn’t do. For example, if a provider says, ‘well, you can have a payment holiday for three months’, well, that’s no good, if then they have to pay the three premiums plus the fourth premium all in one go. That doesn’t help the client. Whereas you have some providers where, for example, Aviva you can have a payment holiday and it be paid back over a period of time. Other providers that will let you have, um, kind of a policy holiday. So providers will allow you to reduce the cover for a certain period of time and then increase the cover again.”

“It’s about just being approachable and showing the client that you’re doing the right thing. They appreciate it when you say, ‘This policy that you’ve had in place for so many years that another adviser was put in place? We’re keeping that actually, we’re going to use the guaranteed insurability option on that policy to increase that cover for you’, showing that you are doing the right thing.”

“There’s also some fairly scary statistics around mental health at the moment. 1 in 6 working-age adults are said to have symptoms of poor mental health. So the dynamics of vulnerability are always changing. And I think that’s why it’s such an interesting area, but also quite challenging one.”  

“What we do have is a vulnerability charter and that’s available on our website. It was developed by the Financial Vulnerability Taskforce, and I think we were the first insurer to sign up to this, alongside a number of advice firms. This charter has nine statements that reflect our commitment to how we identify and how we support customers in vulnerable circumstances… I think that the word circumstance has been used a lot. And I think that’s really important. Vulnerability is not static and it’s not it’s not permanent. There are a lot of temporary vulnerabilities that need to be considered. We’re very careful with language as well.”

“As much as possible, we encourage customers to self-disclose knowing that we’re going to do something both positive and flexible for their needs… At the same time, we also give people the ability to challenge processes that are preventing us from being able to live the charter and making sure that they’re on the agenda and they’re things that we’re looking to fix.”