In March, the FCA published its review of support to customers in vulnerable circumstances. The research that underpinned the FCA’s observations broke new ground for the regulator in two important ways.
The first was by examining the drivers of intersectionality: the way in which different types of vulnerability can interact to create bigger problems.
The second looked at the way in which financial services providers communicate with customers, and the impact that has on key outcomes.
Intersectionality
On intersectionality, the research found that simply having multiple different sources of vulnerability (for example, poor health, low financial resilience and negative life events) did not necessarily result in poor outcomes, provided the elements did not interact.
Where they were ‘siloed’ people, they could have characteristics that matched the FCA’s ‘drivers of vulnerability’ – but this did not stop them from managing their finances sustainably and making good decisions.
However, there were drivers of vulnerability that could exacerbate other drivers.
The research quoted the case of ‘Abigail’, whose mental health condition causes stress, which both reduces her confidence when using digital tools and means that she cannot work full time, reducing her financial resilience.
There are also situations were one driver of vulnerability sets off a vicious circle.
For example, in the case of ‘Emily’, a relationship breakdown pushes her into debt, leading to severe depression and anxiety, which exacerbates addiction issues relating to alcohol and drugs, which then pushes her into still more debt.
These case studies give a clue to firms that are looking to develop a more sophisticated view of their clients’ vulnerabilities.
Observing one life event can prompt firms to ask questions about how a clients’ circumstances have changed, and give an adviser the opportunity to signpost to valuable services and support to clients at an earlier stage.
Communication and service
On communication and service, one observation that ran through the entire report was the value of tailored communication and bespoke service.
As the researchers said: “Every positive experience established by the research was driven by support that felt tailored to the customer’s needs and felt more personal in nature. In particular, this approach made consumers feel like the provider cared.”
They went on to say: “The opposite was found in each negative experience, where consumers reported more standardised approaches. This made it difficult for them to communicate and achieve what they were trying to do.”
They concluded that: “Our qualitative research reveals a clear link between how easy it is ‘talk to a real person’ and trust in that institution. This reduces the feeling that, as one respondent put it, ‘they just want your money’.”
It is a reminder that the traditional, face-to-face model of financial planning can still deliver huge benefits to clients, not only in terms of building trust, but also in terms of reducing stress and anxiety, which are themselves significant drivers of vulnerability and harm.
These two insights serve to remind everyone that when we talk about consumer outcomes – understanding, fair value, consumer support – we are not talking about one set of correct answers.
Instead, we are talking about creating a market that serves the whole public, sometimes through many different providers.
To achieve this vision, firms do not have to offer every option to every customer – that would actually hinder the specialisation that many groups of consumers need.
But it does require an intelligent and connected profession, that understands the needs of different groups, and which is able to direct the public to the best solution.
Matthew Connell is director of policy and public affairs at the Chartered Insurance Institute (CII)
