Engaging directly is key to identify customer vulnerabilities
Identifying and understanding the vulnerabilities of customers became a regulatory requirement in February 2021 for firms. Consumer Duty has renewed this focus and expanded the need to understand and monitor consumer vulnerabilities. Even so, many firms are still trying to get to grips with just how they identify their vulnerable customers.
The FCA’s Financial Lives survey reports that around 50% of all UK adults are vulnerable at any one time. A recent study by Boring Money suggests that, in the advised sector, 22% of customers display at least one vulnerable characteristic. MorganAsh reports a mean closer to the 50% figure across multiple sectors, in line with the FCA’s results – and with some advisers with an elderly customer base reporting proportions considerably higher than the 50%. While different businesses and sectors will have more resilient customers than others, and different firms may measure vulnerability differently, logic dictates that firms need to locate the 50% in their own customer base.
To achieve this, it quickly becomes clear that the most efficient and effective method is to engage with consumers directly. The challenge is that, for many firms, engaging directly on vulnerability is new and still feels quite alien. Furthermore, concerns exist as to whether consumers would be open to answering these types of questions.
Consumers are open to disclose
In reality, consumers are open to answering personal questions about their health and lifestyle – far more than many in the financial services sector generally believe. Indeed, people are in general more comfortable talking about these topics than they are disclosing financial information – something firms do all the time. While many firms fear that asking such information will be problematic, it should also be remembered that there are consumers who have been trying to inform firms of issues but, to their frustration, these vulnerabilities have not been recorded or passed on.
Alongside our own experiences, firms using the MorganAsh Resilience System (MARS) are reporting positive response rates to both vulnerability questionnaires and email invites asking them to complete an online assessment. Face-to-face or telephone follow-ups can then help move that figure closer to 100%.
This quality data sees firms customarily reporting a proportion of vulnerable customers in line with the FCA’s own findings – and ultimately meeting the regulator’s requirements. This is in contrast to those still reporting few or even zero vulnerable customers, which is a clear issue for the regulator and is something the FCA is actively taking action to resolve.
Value exchange
It’s more important than just a regulatory function though. This intelligence allows firms to deliver a far better and more tailored service. There’s no doubt that the majority of consumers are open to answering these sort of questions especially if offered a better service and greater outcomes. To have any success of engaging directly with consumers, it’s worth considering the value exchange – why the customer should even bother engaging with us and what they will receive in return for sharing this information.
At MorganAsh, we position this as an opportunity to understand their personal circumstances so we can best tailor our service to meet their needs. We avoid the word ‘vulnerability’ and don’t make judgements on people.
But, of course, there will always be a few consumers who have concerns or perhaps question the legitimacy of an assessment request. After all, it’s only right that customers question requests for information. While our response rates are high, there’s always more we can do as an industry to encourage the most sceptical of consumers.
Building trust
Given the clear benefits for consumers to disclose and discuss potential difficulties, we are always trying to support firms in building trust and gaining the confidence of their clients. To help consumers understand why a firm is asking for this information about them, we recently launched a new customer portal called itswhoiam.me.
This is a standalone platform that supports a request to complete an assessment. It brings together a full range of helpful resources and information to not only assure consumers that the assessment is genuine, but to clarify why it is in their best interest to engage and disclose any difficulties. With regular updates and improvements, the hope is that the new portal will be an educational tool and one that helps firms position any assessment or subsequent interactions in a positive light.
We can often get so caught up in the regulatory requirements and forget about the competitive advantage Consumer Duty can offer – particularly when it comes to understanding our customers and delivering a far better service. We’d argue though that this is only possible by engaging directly with consumers and identifying why objective assessment offers clear benefits for all – not just those with vulnerable characteristics.
