SFE Insight | Vulnerable customers - it’s us – not them

Shona Matthews is Head of Regulation and Policy at the Chartered Banker Institute

Vulnerable customer– personally, I have some difficulties with the phrase itself; it can mean many things to different people, at different times in their life, making it a messy concept.

Some people may be in vulnerable circumstances, but do not identify themselves as being vulnerable. However, what the coronavirus pandemic has made abundantly clear is that anyone can find themselves in vulnerable circumstances. We should not let the terminology blind us to this fact - a point best encapsulated by Fair by Design and the Money Advice Trust, in their joint guidance for firms called Inclusive Design for Essential Services , published in January 2021:

Vulnerable customers are not ‘them’, they are us.”

The development of the Inclusive Design for Essential Services guide was in part a reaction to the sharp focus on issues of vulnerability by regulators (but anyone truly interested in Building Back Better should read it).

In financial services, a key step forward came in March, with the publication by the UK’s Financial Conduct Authority (FCA) of its finalised guidance on the Fair Treatment of Vulnerable Customers. The Guidance does not replace or substitute existing Principles, rules, guidance or law. Instead, it explains its expectation that firms do the right thing. By this they don’t mean just to simply focus on their culture and people on the fair treatment of all customers, but to understand the potential for vulnerability and the needs of those that become vulnerable. It is clear: doing the right thing is the responsibility of all staff, not just those that sit in a dedicated team.

So how should firms do this? The FCA’s guidance states that the financial services workforce must be appropriately qualified and well regulated. In this context, and in the explicit context of complying with the existing Principles for treating customers fairly, the guidance places a significant emphasis on staff having the right skills and capability, stressing the potential for harm / worsening outcomes for customers in vulnerable circumstances if they do not.

The FCA use a case study to illustrate one-way firms can address concerns; a firm used a piece of online learning to address gaps in knowledge and skills citing this as ‘an example of a useful resource that firms may use to improve the skills and capability of staff, at a low cost.’  Educating colleagues is of course only a start, but good starts are essential.

We were delighted to have supported the  Fast Track into Financial Services programme with access to our Vulnerable Customer’s e-module as it’s essential that anyone coming into the sector starts thinking from day one about their customers, and particularly about those in vulnerable circumstances.

Indeed, Covid-19 has reversed the positive trend reported in the FCA’s 2020 survey of our financial lives in the reduction in the number of adults with characteristics of vulnerability. Updated figures from October 2020 indicate that now over 27.7 million adults find themselves in vulnerable circumstances, a 15% increase on Feb 2020.

Financial resilience is also following a downward trend: between March and October 2020, the number of people with low financial resilience increased by 3.5 million from 10.7 million to 14.2 million; that’s over a quarter (27%) of adults.

But what is meant by financial resilience? What does that really look like? Figures from Money Charity show the real picture for the vast majority of the UK adult population. For example, they have calculated that the average increase in debt and arrears since March 2020 among those who have fallen behind on bills or borrowed for essentials is £2,300. Furthermore, research analysed by Finder.com from May 2020 found that:

  • 93% of Brits don’t have enough savings to live for a month without income
  • 1 in 10 Brits (9%) have no savings at all
  • 1 in 3 Brits have less than £600 in savings

Clearly, whilst there are reports highlighting the fact that some individuals have reduced their outgoings over the course of the pandemic, for example, savings made by working from home, less extravagant holidays, not going to restaurants or spending on other parts of the hospitality and leisure sector, this is largely amongst the wealthier middle-class population. Taking into consideration the fact that these combined figures are from 2020, and given the subsequent waves of lockdown, the reality is that the financial picture for many will be worse now and, sadly, likely to get worse still as crucial government support schemes, like furlough, are phased out later this year. 

So, let’s not forget, these aren’t just statistics – they are our customers; they are also our colleagues, our friends and our family – they might even be us.

As financial professionals, having additional guidance from the regulator to draw on is valuable.  But we shouldn’t lose sight of the fact that what will further benefit the sector is being better able to put ourselves in the shoes of our customers. Indeed, many financial services colleagues will have found themselves in vulnerable circumstances over the past year.

There is some debate as to how long it might take for this empathy to work through into the design and delivery of financial services – but it will come and when it does, it will make a difference. Until then, it is important that the sector considers ways to recruit and retain people with different lived experiences, to hear their voices and to give them chances to help reshape financial services.  

During the 2008 financial crisis, trust in the banking sector was lost. Since then, the sector has worked hard to rebuild trust and through this pandemic has provided an opportunity to show that social purpose and good stewardship of resources is once again at the heart of the sector. How we treat our customers as we support efforts to build back better will be judged critically – particularly if we do not show that we have learned from these experiences – as individuals and as professionals. 

In the meantime, our Institute together with many partners in the sector are doing what we can to ensure banking attracts, grows and retains talent from diverse backgrounds and different lived experiences. We will continue to encourage our members to live by their Professional Code of Conduct and to display emotional intelligence when dealing with their customers. To quote our President Bill McCall, we expect our members to be “doing the right things, on a bad day, even when no-one is looking”.

Published 14 May 2021