Unit 4 / Section 7 - Customer Vulnerability

Question 1

What are 5 reasons why Customer Vulnerability is a hot topic?

Answer 1

1) Outcomes-focused regulation - first area where it is possible to see its application in real world situations
2) Pointer to see how regulation is developing, and its likely future focus
3) The way in which at risk or vulnerable customers are treated is an indicator of how effective the compliance culture is within the firm
4) Reputational risks or regulatory responsibilities can make vulnerability a subject that is concentrated on by boards
5) Use of automation can pose bigger problems for firms where manual intervention is the normal way of identifying categories of customer, and their associated compliance risks

Question 2

What are 6 examples of possible vulnerability?

Answer 2

1) Recent Distress - E.g. bereavement, divorce, redundancy etc.
2) Limited financial capability or resilience
3) Mental incapacity or illness
4) Long-term or debilitating illness
5) Addiction
6) Temporary income shock

Question 3

What are 4 steps in a good conduct approach to VCs?

Answer 3

1) Correct ID and understanding of needs, incl regular updates.
2) Managed relationship - provision of additional support and reasonable adjustments
3) Individual outcomes - human intervention likely required. N.B. Cannot de-risk by avoiding doing business with VCs as discriminatory and reg breach
4) Training so employees conduct themselves appropriately. Differentiated - specialist for indivdiual advice and all employees to ID and escalate.

Question 4

What improvements can firms make to ensure good outcomes for VCs?

Answer 4

• Vulnerability policies - consistency
• All employees awareness of the policy
• Evaluate effectiveness of vulnerability strategies
• Train front-line employees to have conversations and discussions with customers, incl how to access expertise
• Ts&Cs flexible in how they are applied, to help to meet the needs of VCs
• Specialist referral team - authority to make flexible decisions
• Disclosure and comms meet the needs of all customers at all points in their customer journeys
• Provide information in clear and simple formats, and providing explanations (product features, customer responsibilities and liabilities, etc.)
• Confirm data protection policies, safeguarding, and affordability mechanisms all show an understanding of the needs of all customers