Identifying and supporting vulnerable clients

The upcoming Consumer Duty provides a timely reminder of the importance of putting vulnerable customer care at the heart of the financial advice process. While advisers have been working hard to protect vulnerable customers for many years, the new regulations are designed to further enhance standards of care and ensure clients receive the outcomes they are expecting from financial products and services.

Encouragingly, a report by AKG on vulnerable clients, which we were proud to sponsor, found that advisers have strong and coherent views on what constitutes a vulnerable customer. Two-thirds felt well prepared for the Financial Conduct Authority’s vulnerable customer framework, and the majority said they were ready to comply with the requirements.

However, many of the advice firms interviewed saw more challenges than opportunities moving forward. These challenges included how to identify potentially vulnerable clients without using the ‘V’ word; monitoring and responding to issues; and the time, resource and costs involved.

Avoiding the ‘V’ word

Financial advisers are in a prime position to identify and monitor vulnerability due to the long term and ongoing nature of the adviser-client relationship. But a key concern among advisers is how to start the conversation without appearing uncaring or patronising.

When broaching the subject, it’s important not to use the term ‘vulnerability’. There’s also no need to go into specific details of the illness/life event; instead, it’s about understanding the impact, how long it has been going on, the customer’s experience of it, and what assistance they’re receiving. Questions to ask might include: What are you finding hard? Does it stop you doing things? How long has it been going on? Have you experienced this before? Is anyone helping you with this?

It may help to view the conversation as a natural part of getting to know your customer. The customer’s objectives, time horizon, and attitude to risk are all factors that could be impacted by divorce or terminal illness, for example. If you’re advising clients to set up a power of attorney or take out financial protection, this could also offer a natural way of weaving the subject into the conversation.

It’s also important to recognise that the conversation can be difficult. It takes a certain level of emotional maturity and it’s important to manage your own wellbeing to ensure you’re not unduly affected.

Responding to issues

Knowing the best way to respond to vulnerabilities isn’t straightforward, as it depends on the client’s individual circumstances. It isn’t a tick-box exercise, nor is it a case of ‘because of x, we should do y’. If a client has lost their sight, for example, it doesn’t automatically mean that everything should be provided to them in braille, as they might not have learnt to read it. Instead, it’s about taking a client-led approach and asking, ‘What works for you?’

Another challenge is knowing where your responsibilities as an adviser end. If a customer is making a poor decision, it’s important to establish whether that may be an indicator of vulnerability, while also recognising that they have the right to do so. Advisers want to do the best for their clients, but it’s worth remembering that you can’t solve everyone’s problems and there’s only so much that you are able to do.

Finally, we all know how important it is to keep records of what the customer’s needs are. These should be made available to everyone in your firm who is interacting with the client, so there is consistency in how they are supported. If there are several customers who need a particular type of support, keeping records could also help to identify areas where you could enhance the overall standard of care you provide.

How we can help

If you have vulnerable clients and you’re not sure how best to support them, we are here to help. We’ve had a dedicated vulnerable clients committee since 2018 and were delighted to be named Best Adviser Firm for Vulnerable Client Care at the Professional Adviser Awards 2023. Our experience means we fully understand the issues that vulnerable clients and their advisers face, and we are committed to sharing our knowledge with you.

To find out more, please contact your local RBC Brewin Dolphin Business Development Manager.

The value of investments, and any income from them, can fall and you may get back less than you invested. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.