To help meet the requirements of Consumer Duty, Forbes Securities recently implemented MARS, the MorganAsh Resilience System, to assess, manage and report on customer vulnerability. Forbes Securities wanted to ensure that their management of consumer vulnerability is one hundred per cent watertight. Instead of being optional, Forbes Securities requires that all clients complete an assessment – and to consider this as part of accepting the firm’s terms and conditions.
Each client receives an email, from the MARS software, inviting them to fill in an online assessment. For those without an email or who for some reason are unable to complete it, the assessment can be completed by the adviser.
The FCA has warned financial services firms in its ‘Dear CEO’ letters that it is taking supervisory action against firms with “weak identification of vulnerable customers”. Under Consumer Duty, firms must assess and monitor the vulnerability of all clients, throughout the lifetime of products. This forms an integral part of its overarching goal of delivering good outcomes for clients.
Some firms are reporting that they do not have any vulnerable clients, which, considering that around half of the UK’s population is vulnerable at some point, is statistically unlikely.
Mike Kellett Cert PFS Cert CII(MP) Cert ReR, owner and director of Forbes Securities, has been a directly authorised mortgage broker since 2003. He said: “Personally, I believe that the main thrust of Consumer Duty obligations for mortgage brokers will be client vulnerability monitoring – to ‘identify and track foreseeable harms’. If protections for life and income are not put in place at inception, and properly tracked to completion, then – in the event of death, illness or disability – the property could be repossessed. This is a major foreseeable – and preventable – harm. The FCA, FOS and indeed claims lawyers will certainly take this on in the event of a claim – and I don’t see any defence for it now Consumer Duty is in place.
“The MARS vulnerability reports provide valuable live data as to whether a client will get health-rated for life and/or permanent health insurance. It allows vulnerability tracking, throughout the conveyancing process – which is vital under Consumer Duty. Health-rated life premiums will generate increased commissions for the broker, and – once accepted by the client – will very rarely lapse. Of course, this Consumer Duty obligation has then been fulfilled.
“Once reporting starts, any broker who cannot make a declaration based on evidenced management information on Consumer Duty obligations, in a ‘timely manner’, will fall foul of the FCA’s rules, which may endanger their regulatory status to continue trading.”
The FCA is proactively highlighting that the identification of vulnerable customers isn’t strong enough, and firms will need solid reporting to ensure compliance, demonstrating how they consider outcomes for different groups of customers. Firms should be able to identify and address when particular groups of customers, such as those with characteristics of vulnerability or who share specific protected characteristics, receive systematically poorer outcomes. While most firms have taken a softly-softly approach to vulnerability, Forbes Securities is an example of a proactive firm rising to the challenge to ensure not only compliance but also serving customers better – and can demonstrate this.
Many within financial services have a fear that asking personal questions on health and lifestyle will be a turn-off for clients, but this is not the case in practice. Indeed, many people are far more comfortable talking about health and lifestyle than money matters. MARS gives several options on how data can be collected, giving flexibility to accommodate individuals and different processes. There are even options on the types of questions to be included.