Back in February 2015, the FCA published a report on Consumer Vulnerability, and there’s been an increasing focus in the market ever since.
There is no agreed upon definition of vulnerable customers. In its report the FCA uses a broad definition: “A vulnerable consumer is someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”. Practically speaking this includes people who suffer from mental or physical illness, people with low levels of literacy, unemployed people and older people.
However this definition can be extended beyond those officially classed as vulnerable owing to emotional problems, health problems or low income, through to those not technically classed as vulnerable but who would still struggle with an impromptu large bill and naturally worry about paying bills/saving money. A survey by the Money Advice Service has found that 4 out of 10 adults in the UK do not have £500 or more in savings, meaning that they are potentially on the precipice of vulnerability.
Vulnerable customers are important, and the implications of catering for this group’s needs for FS providers are substantial, as there is an increasing onus on providers to be seen to be socially responsible. The FCA report revealed that there is no unified approach for helping these customers beyond small pockets of good practice. The goodwill from providers to cater for this group is there, it is more the practical challenge of how to implement a unified framework across all FS providers so the experience for a vulnerable customer is the same whether they are dealing with provider X or provider Y.
What does this realistically mean for FS providers?
An increasing focus on how they currently deal with vulnerable customers, discovering where this group sits within their research programmes and, if there is a gap, thinking how best to embed this group within a holistic research or customer voice programme. It also poses methodological challenges about how to speak to this group both in terms of channel and tone of voice. For example, there is sometimes a perception gap between what FS providers perceive to be good solutions, such as onboarding customers at the start of the relationship, and the practicality of this – customers who fall into this group may not want to be identified as such right at the start of the relationship in case it means they are treated differently and receive an inferior service or choice of products.
This is the first article of our Financial Services newsletter, which you can download here. It also includes information on how ORC International can help to tackle the industry-wide challenge of working effectively with vulnerable customers; we introduce Phil Brooks and our newly established experience lab; take a look at millennials – debatably the most challenging group yet for the financial services industry; and discuss how robo-advice could help planners stay ahead of the game.