It is almost 12 months since the publication of the Financial Conduct Authority’s finalised guidance for firms on the fair treatment of vulnerable customers. Fair treatment of customers and how to support those with vulnerabilities are two of the most widely discussed topics in the financial services industry, not least because while everyone is familiar with the theory, putting fair treatment into practice can be complex and demand radical adjustments to working practices.
The trajectory demonstrated by the FCA’s business plans and thematic reviews puts the focus squarely on the requirement to both treat customers fairly in practice, and to be able to demonstrate that this results from a strategy with TCF in mind; building products and services around customers’ needs and monitoring treatment and outcomes, with practice adjusted if the firm falls below its own expectations.
Embedding the guidance is vital – the FCA’s aim is to drive measurable improvements in the way firms treat customers, and it is using a carrot and stick approach – with regulator enforcement as the stick. It wants to see demonstrable evidence of a practical shift in staff behaviours and more good outcomes for customers. Ensuring good outcomes is as important now as it has ever been, with the pandemic having exacerbated some of the factors that can contribute to vulnerability. Almost two years ago the FCA’s research suggested that over half of all UK adults were likely to be vulnerable; this has almost certainly increased.
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Helpfully, the carrot comes in the form of clear examples of good and poor practice, which is extremely useful for understanding what the overarching aims actually need to look like on the ground. At 12 months in, firms should be able to document the steps they’ve taken to embed the guidance. Here, we’ll take a look at some of the most important elements to ensure are embedded within business:
1. Identification of vulnerable customers
This is interlinked with the firm’s identification of what vulnerability is likely to mean in the context of their own customer base. Every customer is different, so each interaction will be different, given individual needs. The needs of a customer with Traumatic Brain Injury will be very different to the needs of a customer with visual impairments.
Firms should be clear about the traits of vulnerability that their own customer base has, asking the question ‘What are our customers vulnerable to’. This should be based on research – analysis of their own customer base, and it can draw on demographic research conducted by external firms. This should be documented.
This analysis must feed into the process and product. Given the vulnerabilities most likely to be experienced by the customer base, the firm must understand what types of harm that customers of individual products might be likely to experience. That knowledge should then feed into product design – from the first steps of the project – and into process and procedure.
2. Process and procedure audit/review
Firms need to be able to demonstrate that awareness of the vulnerabilities affecting their customer base are informing their processes and procedures. Awareness isn’t enough on its own, and processes should be informed by the outcomes their customer base should be able to expect, and the types of support they might need to achieve that.
An audit needs to be conducted to ensure not only that a reasonable framework for dealing with vulnerable customers exists, but also that front line staff are given flexibility to work outside of the process if this is in the customer’s best interests. This sounds like a nightmare – particularly in terms of compliance – and the board would be forgiven for thinking this will only encourage loose cannons. But this doesn’t mean individual staff ripping up the process and winging it. Instead, staff should be allowed to deviate from a ‘typical customer’ script where this is appropriate, for example any requirement to reach certain factors to be able to allow the customer to have a payment waiver.
Procedures for every element of the customer journey need to acknowledge vulnerability, and be amended to ensure that staff are able to offer appropriate support.
3. Monitoring staff performance
How staff put procedures into effect will be different for each individual. Staff who have years of experience will likely approach the same customer’s needs in a very different way to a new starter. Everyone has different conceptions of issues, and different skills and experience. This is not necessarily a bad thing. What matters is that the customer receives the right outcome for them.
Staff have a variety of tools at their disposal, to aid a disclosure of vulnerability, a framework for a conversation with the aim of understanding how the situation is affecting the customer and their ability to pay, and how to understand whether a customer has a capability issue. It is critical that staff performance is monitored to pick up on any issues. Standardising the customer experience is not possible, and not desirable – every customer will have different needs. But some aspects of the vulnerable customer journey are non-negotiable, including identification, tone of voice, empathy and support options offered. Staff must have the right skills – if any issues are highlighted, retraining is an option that can help refresh soft skills, awareness of FCA requirements, and frameworks for assisting customers – as well as firm process.
4. Acting on monitoring conclusions.
The FCA are keen to see that improvements have been made where problems are identified. At the centre of monitoring should be the aim to keep practice in line with the theory – the definition of vulnerability that works for the firm, and what good outcomes look like in this context.
Customer contact staff are a firm’s frontline in supporting vulnerable customers, and it is vital that they understand how to identify when a customer may be vulnerable. We offer a dedicated online training course on the fair treatment of vulnerable customers, updated for 2022. Priced at just £20 per user, the course is accessible at the delegate’s convenience and provides a certificate upon successful completion, allowing firms to track and record each user’s progress.
For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.bell@rbcompliance.co.uk.
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