Just 4 in 10 vulnerable customers say they have disclosed their needs to their financial services provider, new research from the FCA shows.
However, those that do open up tend to have better experiences. Three quarters of vulnerable customers who told their firm about their circumstances (74%) said that staff asked the right questions to understand their situation, 6 in 10 (57%) said their firm ‘cared’, and (58%) said their firm took action to provide support they needed.
Anyone can become vulnerable due to health, life events, ability to withstand financial or emotional shocks, or because of poor financial or digital literacy.
The research finds that vulnerable customers are more likely to report a negative experience with financial services firms, such as their bank or insurer, when compared to non-vulnerable customers.
44% of vulnerable customers reported a negative experience with a financial services firms compared to 33% of non-vulnerable customers.
Of the 42% say they have disclosed personal circumstances to firms, 19% were encouraged to do so by the firm and 22% felt it was necessary given their circumstances.
Just a quarter (25%) of those in vulnerable circumstances said they felt uncomfortable explaining their situation to a financial services provider.
Reasons for not disclosing personal situations include being embarrassed (37%), not wanting to be treated differently (24%) and being worried they may get a worse deal (23%).
19% didn't know the firm would help, 16% had security concerns, and 16% said their circumstances had no impact on their financial affairs.
Sarah Pritchard, executive director of competition, markets and international at the FCA, said: “It can be hard to tell your bank or insurer about your specific needs but those who ask for help tend to feel more supported. We’ve seen good examples where financial firms are making a difference for vulnerable customers, but we know that vulnerable people report more negative experiences than others.
“We want firms to build on the good work identified, to help people open up and make sure they get the support they may need.”
Anthony Scammell, customer outcomes director at Quilter, commented: "The industry has come a long way when it comes to the treatment of vulnerable clients, however, clearly as the FCA data shows, sufficient levels of trust have not been established with everyone to get vulnerable clients to open up. As such, while initiatives and technology can help identify potential instances of vulnerability, some may be falling through the cracks.
"What can often be easily forgotten is that vulnerability can affect anyone, regardless of the level of assets they may have. Indeed, many of us either experience vulnerability ourselves or know someone who is vulnerable, so it should be at the forefront of our minds when dealing with clients. While wealthier people may not experience the anxiety of paying a monthly bill, they can have a change in circumstances, whether that be divorce, health-related or another reason, which can heighten their fears around their finances. Often that vulnerability becomes recognised after the fact and it is ensuring there are process and practices in place to identify and record vulnerability at the earliest stage possible.
"The impact of the pandemic and the subsequent cost of living crisis has meant the industry has moved to improve things at a pace they may not have previously. We ourselves introduced a ‘tell us once’ service, along with other initiatives, at the group level so that if one area of the business is notified of a vulnerability, every other business unit that client may have an interaction with is made aware so communications can be tailored accordingly. These sorts of innovations have helped to improve the picture, but more can always be done. There will naturally be a balance between compliance and data protection requirements, but this should not hold firms back from providing front line staff with training and the tools to be able to have open and honest conversations with clients or be in a position to spot a vulnerability at the earliest opportunity.
"The Consumer Duty has helped to underline the importance of having the right processes in place achieving this. It is something that should be at the heart of a financial services company’s culture. This is not a box-ticking exercise and businesses will be expected to demonstrate how they have improved processes and how good customer outcomes are being met for everyone, including those that are vulnerable."
Conor D’Arcy, deputy chief executive of the Money and Mental Health Policy Institute, added: “This review underlines that people in vulnerable circumstances still aren’t consistently getting the service and outcomes from financial services that other customers receive.
“It’s worrying that only a minority of customers in vulnerable circumstances have disclosed their needs to financial services providers, and our own research suggests that this proportion is particularly small for people with mental health problems. That means that an alarmingly high share of people who could really benefit from extra support are missing out - which can have big impacts on our finances and our mental health.
“This isn’t a new problem, and we know what the solutions are. Firms need to be more proactive in encouraging customers to share their needs and to take tangible action in response to disclosures. To really deliver that step up in outcomes for people in vulnerable circumstances, the FCA must be ready to step in decisively with firms that consistently fail to meet the expectations set out in the vulnerability guidance.”
