Recent figures from the Financial Conduct Authority (FCA) have exposed the extent to which the Covid-19 crisis is impacting the finances of adults in the UK.

The regulator’s Financial Lives Survey, which benchmarks nation’s financial resilience, showed that more than half (53%) are in some sense considered vulnerable (27.7m).  It is estimated that between £5-10 billion is being lost to scammers annually and the average age of the victims is 75.

Taken from a survey in February last year and another in October, six months after the pandemic struck in March, the FCA data published in February this year stated that the percentage of the adult population suffering from poor health, low financial resilience, or had faced negative life events was up 15% compared to February 2020 when 24 million were classed as vulnerable.

Financial vulnerability has never been higher on the agenda than since the onset of Covid-19, and FCA report reaffirms how widespread this issue is across the UK. The pandemic has left over a quarter of UK adults with low financial resilience according to these findings.

In addition, thousands of people’s financial, mental, and physical health has worsened, in some cases overnight, with many older households in particular facing job loss or faltering pension fund performance.

The FCA guidance states: ‘Protecting vulnerable consumers remains a key focus for us and given the impact of the Coronavirus pandemic, it is more important than ever that firms get this right. The guidance will help ensure vulnerable consumers are treated fairly and achieve outcomes as good as other consumers.’

Treating Customers Fairly

The key Principle underpinning the need for firms to take particular care in the treatment of vulnerable consumers is Principle 6 – Customers’ Interests: A firm must pay due regard to the interests of its customers and treat them fairly.

Firms can expect to be asked to demonstrate how their business model, the actions they have taken and their culture ensure the fair treatment of all customers, including vulnerable customers.

Actions that firms should take.

Understanding customers’ needs

Organisations need to understand the nature and scale of characteristics of vulnerability that exist in their target market and customer base. In addition, the impact of vulnerability on the needs of consumers by asking themselves what types of harm or disadvantage their customers may be vulnerable to, and how this might affect the consumer experience and outcomes.

  1. Skills and capabilities

Fair treatment of vulnerable consumers needs to be embedded across the workforce. All relevant staff should understand how their role affects the fair treatment of vulnerable consumers by:

  • Ensuring frontline staff have the necessary skills and capability to recognise and respond to a range of characteristics of vulnerability.
  • Offering practical and emotional support to frontline staff dealing with vulnerable consumers.
  1. Product and service design

The potential positive and negative impacts of a product or service on vulnerable consumers should be considered carefully and  products and services designed to avoid potential harmful impacts.

Vulnerable consumers are to be taken into account at all stages of the product and service design process, including idea generation, development, testing, launch and review, to ensure products and services meet their needs.

  1. Customer service

The following steps will need to take place:

  • Setting up systems and processes in a way that will support and enable vulnerable consumers to disclose their needs. Companies should be able to spot signs of vulnerability.
  • Delivering appropriate customer service that responds flexibly to the needs of vulnerable consumers.
  • Making consumers aware of support available to them, including relevant options for third party representation and specialist support services.
  1. Communications

All communications and information about products and services are to be fully comprehensible for all customers.

Consideration needs to be given to how organisations communicate with vulnerable consumers, taking into account their needs. Where possible they should offer multiple channels to give vulnerable consumers have a choice in the way they want to connect.

  1. Monitoring and evaluation

Appropriate processes need to be set up to evaluate where companies have not met the needs of vulnerable consumers, so that they can make continual improvements.

As part of this process regular reviews of management information should be carried out on the outcomes they are delivering for vulnerable consumers.

The FCA guidance explains that to achieve good outcomes for vulnerable customers, firms should:

  • understand the needs of their target market / customer base.
  • ensure their staff have the right skills and capability to recognise and respond to the needs of vulnerable customers.
  • Respond to customer needs throughout product design, flexible customer service provision and communications.
  • monitor and assess whether they are meeting and responding to the needs of customers with characteristics of vulnerability, and make improvements where this is not happening.

Clear direction

The guidance now provides the clearest direction to firms that the key question they need to be asking is ‘what are our customers vulnerable to?’

Anyone who attended our webinar on vulnerability last year will have listened to us emphasising just how important this is. Seeing it now referenced so clearly in the guidance reemphasises this point.

Firms shouldn’t just look at vulnerability as being associated with older age groups or with one specific health condition or a life event, but rather think more broadly about difficulties or common harms that consumers may now face.

Practically embedding the Guidance

There is plenty of practical guidance within the publication but primarily organisations need to:

  • Develop products for real customers, which are clear and easy to understand.
  • Think positively about finding positive solutions that work for customers and you as a company.
  • Be more proactive in identifying signs and signals of vulnerability.
  • Ensure that disclosed information is effectively recorded, shared, and responded to
  • Offer a flexible and tailored response to members who experience a sudden change in circumstances.

The cost to firms

The FCA estimate that implementing their guidance across financial services will cost £710 million as a ‘one-off’ figure, and £450 million in each following year.

They also note these are all ‘COVID-19 free’ estimates.  Since then, 23% of UK workers have either been furloughed, lost their job, or lost hours and pay; the current guidance was shaped before the global pandemic.

Clearly, it can be difficult – with current data – to quantify the consumer benefits of the FCA’s guidance.  However, running right-through the FCA’s guidance is the belief that it will lead to more appropriate consumer transactions and greater reductions in financial difficulty.

Furthermore, the FCA also believe, if  the guidance is implemented correctly, it will lead to reductions in psychological stress, and consumer time savings.

Taking decision-making difficulties as an example – following the guidance can allow firms to not only help people whose mental health problems which may impair their decision-making, but also those taking medication that may affect the choices they make, and those with literacy or language problems.

The FCA’s emphasises the importance of the design of products, services, and journeys that take vulnerability into account.   The high-level guidance on the design cycle and the involvement of vulnerable consumers within this reinforces the importance of integrating vulnerability fully into company culture.

The Guide also includes a new section on practical and emotional support for staff .   While the ‘consumer voice’ on vulnerability must always be heard, staff are the ones who have to translate the policy into practice on the frontline.

Finally, there is a strong emphasis on data collection, monitoring, and outcomes.   The FCA expects firms to demonstrate that “vulnerable customers experience outcomes as good as those for other consumers”, so every organisation will need its own ‘vulnerability data’ strategy.


The new FCA guidance is welcome, well-considered in many places, and certainly in the wake of the impact of Covid-19, very timely.

And it will take time to put into practice.   Time to interpret, time to implement, time to measure, and time to embed throughout the organisation.  This will represent a five year plan for financial services, rather than being the endgame.

Meeting the challenge

So, while the publication of this document marks the end of a long process that started many years ago, it also signals the start of another era, and arguably the most important part of it all.

The also reminds firms of how far most of them have come.  But stresses that companies need to ensure there are not just isolated pockets of expertise or excellence in their business; everyone in the organisation needs to consider their contribution to protecting vulnerable customers.

Feature written by Jane Silk


Categories: Silver Blog