There is still a great deal of uncertainty about how someone is defined as vulnerable; what a vulnerability is. The FCA’s data (confirmed with live data from MorganAsh’s vulnerable consumer management tool, MARS) shows that around half of all people can be defined as vulnerable. Yet others say that they have only a few per cent of vulnerable consumers. Can this be true? Andrew Gething and Johnny Timpson OBE try to dig into the answers.

While people prepare to report under Consumer Duty, Andrew Gething observes that one of the things many companies don’t understand is that Consumer Duty also requires them to report under the Equality Act. The Act has been around for some years, but many haven’t recognised the part it plays in Consumer Duty. Johnny Timpson OBE shares his thoughts.

It seems that quite a few firms are waiting for the FCA to take action before putting their full weight behind managing consumer vulnerability. After all, if there is little or no action, then there’s perhaps little or no need to do anything? Recorded before the FCA performs its first review, Andrew Gething and Johnny Timpson OBE discuss how firms should be preparing – and what the regulator is likely to do.

As we head towards the FCA’s first review, we’re in uncharted territory. No one really knows what the stance of the regulator will be – they can only guess. Any form of action is, of course, likely to be proportionate to the failure to meet Consumer Duty. The problem is that one person’s view of a ‘bad outcome’ may be different from another’s – so what will be the regulator’s view?

When assessing the vulnerability of consumers, most firms store that data themselves and don’t share it. The problem with this is that it means consumers may well be answering the same types of questions again and again – tiresome, to say the least. And, if different firms assess people in different ways, the results of those assessments and how they are subsequently treated will also differ. Some sectors, such as utilities, are starting to get around these issues by sharing data. But what are the challenges, advantages and pitfalls of this? Andrew Gething and Johnny Timpson OBE discuss.

Consumer Duty uses the term ‘vulnerability’ – but is that word itself unhelpful? Does it come with preconceptions, stigma or assumptions? Is the term ‘suitability’ more appropriate? Andrew Gething and Tony Crane discuss the need for labels – but also why the need to have a common understanding of these is important. 

What happens if you decide to not monitor individual customers – and just assume that half of them are vulnerable but you believe they all have good outcomes? How far down the path of risk does that go? If some monitoring takes place at the point of claim, or when an issue is raised, is that enough? Under Consumer Duty a firm is required to demonstrate that it is treating people with vulnerability characteristics as fairly as those without – so being passive, argues Andrew Gething when discussing this with Tony Crane, isn’t enough. 

While all firms will have activities in place to avoid harms, it’s certain that these aren’t as robust as Consumer Duty would expect. Andrew Gething shares his experience of assessing vulnerable consumers, what can be done when a vulnerability is discovered – and why many current next steps are unlikely to help actually address that vulnerability. Also, vulnerabilities are often looked at in isolation, but real issues arise when people experience more than one vulnerability – and addressing these holistically, rather than separately, happens far too infrequently. 

Under Consumer Duty, there is an obligation to monitor the customer throughout the lifetime of the product. For some products (say, mortgages) that monitoring should take place over many years. Who has to do the monitoring? Is it the adviser, manufacturer – or both of them? Someone has to do it – Andrew Gething and Tony Crane look at how this can be based on circumstance, relationship, product creation and more. All parties need to understand who is doing it and not assume that it’s being done by someone else; there is always an obligation to know that this is done. 

Consumer Duty frequently mentions harms – but what are these? How do you go about assessing harms for your products and services? Some harmful outcomes are not trivial – and quite a lot of other circumstances can lead into those harms. Andrew Gething explains to Tony Crane how to look at harms in the context of a product and assess how large the harm is – or potentially could be. Andrew shares his firm’s experience of undertaking risk assessments to quantify risks – and how this can be applied to financial products and services. 

Tony Crane and Andrew Gething look at Consumer Duty’s ‘guidance’ and ‘rules’ to unpick whether – in real-world terms – there is a difference between these and the implications of deciding to ignore guidance even when following rules. Tony leads Andrew back to the principle that firms should be delivering good outcomes and that everything supports this – and in that sense there is little difference between the two. More importantly, deciding to comply with one and not the other misses the overarching principle of delivering good outcomes and avoiding harms. 

As firms gather vulnerability data on their clients, it’s clearly going to become the case that firms gather data in different forms and amounts – and can lead to consumers being asked again and again for very similar data, itself not a very good outcome. Even for a single product, a consumer could need to supply the same information for a manufacturer and adviser – or more. For example, for a mortgage, a consumer may need to do this with the mortgage provider, life insurance provider and general insurance provider – again, not a great customer journey. Andrew Gething and Tony Crane look at the options to share this data and how it may ultimately be the only way to provide the best customer experience. 

That vulnerability is not included within Consumer Duty as an explicit cross-cutting rule can create some debate as to its importance within the various rules. Andrew Gething and Tony Crane look at although this isn’t the case, vulnerability is included within each cross-cutting rule – so its importance within Consumer Duty shouldn’t be downplayed. They examine practical examples – such as the rule for acting in good faith and the rule for avoiding foreseeable harm, which include within them avoiding harm to vulnerable customers. In a sense, vulnerability cross-cuts all of the vulnerability rules – making it one of the most important aspects of Consumer Duty. 

Consumer Duty frequently makes reference to ‘advisers’ and ‘manufacturers’– implying for many that there is a difference in responsibility between these. After all – advisers advise, and manufacturers create products. However, in this episode of Duty Calls, Tony Crane and Andrew Gething explore how – under the Consumer Duty – advice firms are classified as manufacturers (because the FCA’s definition includes a firm’s advice service making it a manufacturer of the services the firm provides). Additionally, advice firms can be classified as product manufacturers – find out why. 

Consumer Duty requires firms to not only understand the vulnerability characteristics of consumers, but also to tailor their communications, taking those characteristics into account. Tony Crane and Andrew Gething examine at what point it is best to ask consumers about potential vulnerabilities – and then what to do about it, how to tailor communications and the channels used to communicate with those consumers. They also look at topics such as how having a digital-first or digital-only communications strategy can be counter to the requirements of Consumer Duty. 

While some rules within Consumer Duty don’t explicitly state a specific need to accommodate or report on consumer vulnerability, the regulations do contain cross-cutting rules – each of which has a reference to vulnerable customers. What does this mean? Andrew Gething and Tony Crane look at a specific rule (in this case, rule 2A.9.10) to see how this is cross-referenced against the needs of those who are vulnerable. They also discuss how ‘measuring outcomes’ doesn’t mean waiting until an outcome occurs before you measure outcomes.  

Consumer Duty does require firms to pay regard to the nature, scale and characteristics of consumer vulnerabilities – but in practical terms what are the implications of this? Consumer Duty is a principle-based regulation – so there isn’t a definitive checklist of practical actions. It’s largely up to firms how they go about things – even if there is no doubt about what they need to do. So, within this framework, how do you assess vulnerability – and does this mean you need to assess everyone? Is there an easier way to deal with people en masse? Andrew Gething and Tony Crane discuss this in detail. 

Regulations mean nothing without enforcement – and Consumer Duty is no different. Andrew and Tony discuss how Consumer Duty’s interesting use of ‘self-policing’ makes everyone in the supply chain accountable to everyone else – and can help create a ripple of cultural change throughout the financial services industry. 

After the July 2023 deadline, firms will still be spending perhaps years adjusting their processes and systems to ensure that they get the right vulnerability data – arguably one of the hardest but most important parts of Consumer Duty. Andrew and Tony examine the challenges needed to be overcome to meet Consumer Duty – and how these challenges evolve as the industry’s adoption is refined. 

Understandably, advisers and firms are at different stages of Consumer Duty adoption. This episode looks at the progress within the financial services industry – with Tony and Andrew looking in depth at the different approaches to adoption. They also examine how different parts of the value chain are approaching Consumer Duty – and how this may introduce inconsistencies.