Vulnerable Clients Flashcards
How does the FCA define a vulnerable client?
Someone who due to their personal circumstances is susceptible to detriment when a firm does not exercise care
How do the CMA clarify two types of vulnerability
competition and market authority
1) Market Context - Making financial decisions at difficult times (e.g. bereavement)
2) Personal characteristics - Disability, illness, ageing
market context can happy to anyone at certain times
What can vulnerability lead to?
in terms of decision making
1) Being under time pressure
2) Brain being “elsewhere”
3) Heightened stress levels
4) Changing attitude to risk
As a result of detrimental decision making, what can happen?
Firms are able to take advantage of these clients
e.g. could charge a higher price or recommend unsuitable products
What have the FCA found firms fail at in terms of treating vulnerable clients?
1) Too many one-size fits all approaches
2) Complicated systems & information
3) Frontline staff not trained (to recognise or deal with vulnerability)
What 4 key areas have the FCA suggested firms should work on?
1) Understanding customers needs
2) Ensure staff have the right skills
3) Respond to customer needs
4) Monitor if response is working
understand, respond and monitor (whilst training staff)
What 4 core areas of vulnerability have the FCA identified?
1) Health
2) Life Events
3) Resilience
4) Capability
Give examples of health as a vulnerability
Physical disability, illness, mental capacity
Give examples of life events as a vulnerability
Bereavements, divorce, income shock
Give examples of resilience as a vulnerability
Debt, low income, low savings
Give examples of capability as a vulnerability
low knowledge of product, poor english, low tech skills, low confidence
What 3 areas does the FCAs practical guidance focus on?
1) Product and service design
2) Customer Service
3) Communications
What do the FCA say staff should be able to do?
re: vulnerable people
1) Identify vulnerability
2) Have skill to engage to extract relevant info
3) respond appropritaely / be sensitive
4) provide support
What guidance does the FCA give on product and service design?
vulnerable clients
Products should not be complex (to avoid negative outcomes)
What guidance does the FCA give on customer service?
vulnerable clients
Vulnerable clients are more likely to need support (staff should be trained to deliver this support)
What guidance does the FCA give on communications?
vulnerable clients
communications should be clear and easy to understand
What does the FCA expect firms do to after they implement vulnerable client changes
evaluate and monitor the changes
