Consumer Duty rules require advisers to recognise not just vulnerable customers, but potential circumstances that could put clients in a vulnerable position such as a divorce or inheriting a large sum of money.
This is according to Keith Richards, CEO of Consumer Duty Alliance (pictured), who was taking part in a session on the first day of Income Protection Action Week (IPAW) earlier today.
Richards explained that while advice firms do have to recognise the needs of clients with an identifiable disability such as an eye sight problem or hearing issue, the Financial Conduct Authority’s (FCA) Consumer Duty also requires them to focus on people that are in temporary periods of vulnerable circumstance.
Significant change
“The interesting change from the FCA I might add is its move away from vulnerable customer to vulnerable circumstances,” Richards explained.
“We’ve now got to look at it as if someone came to us, an existing client or customer with a bereavement in the family or going through a divorce, and we would need to recognise those potential circumstances that would require us to give additional care and attention to this customer given the circumstances that they’re facing.
“We might offer them additional help and support because of their circumstance.
“So this shift away from vulnerable customer to the circumstances that people face is quite a significant change.”
Thinking about the role advisers perform
Consequently, Richards added the regulator wants advisers to think about the role they perform.
“It is often helping people mitigate vulnerable circumstances,” Richards continued. “Because sometimes consumers come to us where they’re experiencing a life change that makes them vulnerable.
Richards cited the example of where a customer inherits money and has never made any investments before.
“They are now in a vulnerable circumstance because they’ve got no real experience of the investment market and they’ve never experienced the volatility of the way markets go up and down,” Richards continued.
“So you would need to take extra care and attention when guiding that client on any products and services you have to offer and any ongoing support you provide.”
Richards added that advisers really need to think about what the regulator is asking them to do.
“It is to demonstrate that we recognise circumstances that may need additional consideration, help or support,” he said.