More sector-specific guidance on vulnerability is needed, especially in relation to good practice and outcomes, the Consumer Duty Alliance (CDA) has warned.
CDA’s claim follows the publication of the FCA’s findings from its latest vulnerability review.
The CDA said that, for advisory firms, the term ‘vulnerability’ still remains largely associated with identifiable disabilities or later life, rather than more broadly relating to individual client circumstances.
This is validated by the FCA highlighting that in its outcomes monitoring work, it was a small number of firms predominantly in the wealth and asset management sector that had identified zero or very few customers in vulnerable circumstances.
CDA CEO, Keith Richards, said: “We commend the FCA on its engagement strategy in relation to this latest vulnerability review, but the examples of good practice are too generic and naturally based on all sectors of retail financial services.
“The examples and language used therefore do not always resonate with the financial planning community, which highlights the need for more sector-specific guidance.
“Some good and poor practice examples will naturally read across to all sectors but banks, lenders and product providers have a much wider consumer demographic than advice firms, and this can have the unintended consequence of suggesting to advisers, wealth managers and stockbrokers that this is not so relevant for them.”
The FCA stated that most firms in its multi-firm work into outcomes monitoring were unable to show how they effectively monitor and take action on outcomes for customers in vulnerable circumstances.
However, the CDA believes that the first step for advice firms is to recognise the wide spectrum of vulnerability and introduce a systematic process for screening all clients.
This, it added, can then result in an appropriate accommodation of the needs of those at increased risk of foreseeable harm or sub-optimal outcomes.
Richards concluded: “The FCA continues to demonstrate a new era of collaboration and engagement, which trade and professional bodies have a duty to respond to.
“The Alliance and our affiliates are collaborating to support members with specific and relevant good practice, and work with the regulator to help to build better understanding of vulnerable circumstances in relation to clients within the advice profession specifically.
“The FCA regulates a very broad range of financial businesses, but to drive better understanding and outcomes, we need more focus on guidance tailored to the advice community.”
