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How to identify vulnerable clients

by Emma Bond on 12·05·2020

Vulnerable Clients



Protecting vulnerable clients is a key priority for the FCA with a Guidance Consultation in July 2019 and further guidance expected in 2020.


What is a vulnerable client?  The FCA defines a vulnerable client as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care” and provides four key drivers of vulnerability:


Health – physical disability, severe or long term illness, hearing or visual impairments, poor mental health, low mental capacity, or cognitive disabilities.


Life events – caring responsibilities, bereavement, income shock, relationship breakdown, non-standard requirements (ex-offenders, care leavers, refugees).


Resilience – low or erratic income, over indebtedness, low savings, low emotional resilience, lack of support structure.


Capability – low knowledge or confidence in managing financial matters, poor literacy or numeracy skills, low English language skills, poor or non-existent digital skills, learning impairments.


These drivers are clearly more detailed than simply assessing a client’s age, health, or recent life events.  Interestingly age is not mentioned as this itself is not an indicator of vulnerability, although many firms automatically require a client who is over a certain age, for example over 80, to be deemed vulnerable and offered the option of a third party being present.  For some firms, clients who are older again, for example over 90, must have a third party present.


Consequences of vulnerability are heightened stress levels, increasing time pressures increasing pre-occupation limiting ability to manage, processing power and ability decreases due to competing pressures, lack of perspective and not understanding the broader implications, unable to make comparisons or see the “bigger picture”, and changing attitudes towards taking risks – becoming more reckless or careless at moments of stress.  In turn these consequences make vulnerable clients more likely to experience:


  • Financial exclusion
  • Difficulty in accessing services
  • Partial exclusion
  • Disengagement from the market
  • Scams
  • Over-indebtedness
  • Exposure to miss-selling
  • Inability to manage a product or service
  • Purchasing inappropriate products or services


Adviser and firms must assess whether a client is vulnerable and have processes in place to protect and assist clients who are vulnerable.  The FCA’s Decision Procedure and Penalties Manual DEPP 6.5A.s (calculation of enforcement fines) states “In deciding which level is most appropriate to a case involving a firm, the FCA will take into account various factors….including whether the breach had an effect on particularly vulnerable people, whether intentionally or otherwise…”.



So what can you do?


The FCA states that doing the right thing for vulnerable client should be embedded in the culture of firms.  As a result, firms should be more focused on ensuring that outcomes experienced by vulnerable clients are at least as good as those of other clients.


A vulnerable client policy must be considered across all parts of the client journey from initial advice to ongoing servicing and processes put in place to assist the client at all stages.


Review current policy


  • How are vulnerable clients currently identified?
  • Are clients actively encouraged to disclose potential vulnerabilities?
  • How are vulnerable clients recorded within the firm?  
  • What adjustments are currently made for vulnerable clients?
  • Are staff aware of the current policy, is it practised across the firm?


Develop strategy


  • What additional information should be gathered when providing advice?
  • Be aware of changing circumstances, potential conflicts of interest or undue influence.
  • Do staff feel comfortable and have sufficient training to assess vulnerability?
  • Some vulnerabilities may be obvious and adjustments easily made - a visually impaired client being offered documents in larger print or braille.  Others may not be immediately obvious and more complex - a long standing client acting differently or showing signs of a change in character, requiring a delicate conversation with the client and potentially their family.
  • Obtain feedback from clients on how current processes can be improved
  • If a client is vulnerable, how is this recorded?  Is the information available to other staff when needed in the future?
  • Identify key points in the client journey, how vulnerability can impact on the client experience and what can be done to improve these. 
  • Does the normal advice process meet a particular client’s needs or are adjustments needed?
  • Consider presentation of information and whether there is a need to adjust delivery or format.
  • Minimise the use of jargon or technical talk.
  • If appropriate, consider if a third party should be involved in the advice process or referral to a specialist service. 


Roll out


  • Have a formal written approach to vulnerability.
  • Provide training for all staff.
  • Embed appropriate behaviour.


Evaluate, change and review


  • Evaluate ongoing performance.
  • Seek feedback.
  • Maintain training.
  • Implement periodic review and re-evaluation.

It is clear that a vulnerable client process must be more than a tick box and a comment on a Fact Find.  A robust process, throughout the advice processing and future servicing, not only protects your firm from complaints and potential scrutiny from the FCA, it provides good outcomes for your clients and increases trust in your business, whether the client is vulnerable or not.


Emma Bond, Senior Paraplanner, The Timebank


Sources and further information:


FCA Guidance Consultation GC19/3 – Guidance for firms on the fair treatment of vulnerable customers, July 2019


Personal Finance Society – Meeting the needs of vulnerable clients, September 2017


JUST Technical Bulletin – How to identify vulnerable clients, March 2020