Introduction
The aim of this policy is to outline the practice and procedures for staff to contribute to the prevention of detriment to clients who find themselves in vulnerable circumstances. The policy covers all staff within the firm and, in particular, those operating in areas that deal directly with clients or those acting on behalf of a client.
The Definition of a Vulnerable Person
The Financial Conduct Authority (FCA) has developed the following definition to guide work in this area. However, the FCA does not make specific rules to address each area of vulnerability. Instead, they establish the responsibilities within their principles for all firms. These include:
FCA Principles
Treating Customers Fairly Principles
The principles above are set out in regulation on how firms must deal with and treat their clients.
What constitutes someone to be vulnerable
Vulnerability occurs in a variety of ways which may be permanent, temporary, or even sporadic, dependent on its nature. In many circumstances the individual may not recognise themselves as ‘vulnerable’.
We recognise that vulnerability may not be simply due to the situation of the consumer but caused or aggravated by the actions or processes of the firms they may deal with, and is considered to be someone who:
“Due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”
What constitutes someone to be vulnerable, or potentially vulnerable, can include:
There is no definitive list of the different types of vulnerability. Even if there were, different people react differently to different situations and it is therefore important to:
We recognise that clients who might be considered as being in vulnerable circumstances could include those with:
We must remain mindful of the potential for enquiry by these clients and the potential for any change of circumstance in respect of existing customers.
Understanding the different types of vulnerability
We may work with clients who at outset are in a permanent or temporary state of vulnerability. We will also advise someone who at outset would not be considered to be in a vulnerable position but changes to their personal circumstances could, in turn, change that status. Therefore, to understand vulnerability it is important we identify some of its drivers.
Whilst it would be very difficult to create an exhaustive list, here are some of the factors that could help our practice identify potential vulnerability. Characteristics include:
However, it should be noted that displaying a characteristic does not automatically mean that an individual is vulnerable. Identification of the characteristic can deliver the same outcome, albeit in a suitably tailored manner, however, it is important to determine if the characteristic has led the client into a particular personal situation or vice-versa. Situations include:
A person with a vulnerability is usually described as someone who is at a higher risk of harm than others. It is possible the customer may be subject to more than one area of vulnerability. It will not always be easy to identify a vulnerability. Some of the signs may be obvious, whilst others may be hidden or not disclosed. It should not be assumed that a customer will disclose a nature of vulnerability that cannot be identified through the naked eye or by having a basic knowledge of that customer. It may only be identified through thorough questioning of the customer to fully understand their circumstances and appreciate their needs. The risk of not understanding the vulnerability therefore increases where there is no personal interaction with the customer.
Identification of clients in vulnerable circumstances
Vulnerability is broad and may occur at any time. It will usually involve the interplay of characteristics of the individual, their circumstances, and static or transitory status.
We only deal with customers in vulnerable circumstances where we are aware of their needs:
The nature of the need area to be addressed may also indicate vulnerability. For example, people wanting to arrange:
These could be some indicators of vulnerability, but this is not designed as an exhaustive list. In the circumstances that apply to our firm we will apply additional safeguards, as appropriate, to ensure fair treatment. This will apply to each individual but where we identify groups of the same people, we may establish a process aligned to the needs and circumstances of that group.
Assessment and management of risk
Just because somebody is vulnerable it does not automatically mean that they are unsuitable for the
advice and services our firm supplies. As soon we think we may be engaging with vulnerable
clients we will make a record of this and ensure we adhere to this policy.
When speaking to the vulnerable consumer we will:
We will not discriminate against clients in vulnerable circumstances. Where the vulnerability is mutually recognised, we will only adjust our fees where our services require extra resource to treat the client fairly. Any additional costs will not seek to profiteer from the situation and will be fully disclosed to the client before any subsequent work is carried out.
Where we feel we do not have the expertise to deal with the client due to their personal situation we will make every attempt to refer them to another firm or third party for the appropriate level of support to be provided.
Understanding the benefits to our firm
Supporting customers and clients who are in a vulnerable position is not just a regulatory but is also a moral responsibility. We intend to fulfil our duties in this area and as a firm we see the benefits in adopting the right approach. These include:
We will review our practices periodically for consistency and to determine adherence to the stated policy.
Determining how we deal with different people with different vulnerabilities
Once a vulnerability has been identified, we will consider how it is recorded and what, if any, changes they make to their sales or service processes and outcome. Some vulnerabilities are not always easy to deal with. Once a vulnerability has been identified and understood, we may deem that specialist support, which is not within its own capabilities, expertise or resources, is necessary. At that point, we will cease to act on behalf of the customer and may wish to refer them on to a suitably qualified and experienced firm. We may take this decision if we believe we cannot act in the client’s best interests.
The following illustrates mitigating actions for clients with mental capacity deficiencies (for the avoidance of confusion “competent person” means an individual without the limitation presented by the client):
Our Rights and responsibilities
FCA Principles for Business 2,3,6,7 & 9;
TCF Outcomes 1,2 & 4;
Conduct of Business Rules;
DEPP 6.5A.2 (calculation of enforcement fines);
Senior Manager Conduct Rules;
Individual Conduct Rules.
Responsibilities of our employees:
Identification of and treatment of vulnerable clients – Client Evaluation
The detail below sets out our approach to dealing with all individuals and help us to determine their circumstances and if they are in a permanent or temporary vulnerable situation. These guidelines will be distributed to all staff and each will be trained on the areas relevant to their role.
Assess the client against our vulnerability policy
Actively seek to encourage disclosure about potential vulnerability
Ensure the approach taken is accurately reflected in the business records
Consider whether to discuss the approach with colleagues/other professionals
Ensure the know your client information gathers sufficient details to support the advice and uses additional questioning where appropriate
Consider any unusual aspects – e.g. if someone else is accompanying a client, is there the potential for undue influence from that person
Understand who the client is and the extent of the instructions needed to act on e.g. Power of Attorney
Consider whether the client is acting differently/showing signs of a change of character
Set a list of questions to check client memory recollection, where appropriate
When working with more than one person, is there the potential for any conflict of interest or undue influence
Confirm any change in circumstances which might lead to vulnerability e.g. taking on caring responsibilities
Establish whether the client’s stated needs and objectives align with their current circumstances
Consider whether the standard sales process or specific vulnerability group process is appropriate to the client’s needs
Identify products/solutions that are clear and easy to understand for those showing signs of vulnerability
Consider whether there is a need to adjust the delivery and format of communications e.g. providing a report in large print
Explain all matters with no or limited use of jargon
Try to accommodate flexibility around appointment locations and times e.g. visiting the client at their home at their preferred time of the day
Try to determine if the duration of the meeting will need extending to accommodate more detailed explanations and delivery of information
Determine if the complexity of the advice will require delivery over a greater number of meetings
Considered the accessibility of office visits for those with health conditions/disabilities