Vulnerable signs for advice firms to watch out for

The FCA has recently published several documents on the fair treatment of vulnerable clients.

Graeme Stewart

Graeme Stewart

29 March 2021
These include final guidance and a feedback statement, and appeared not long after the regulator's latest Financial Lives report on the impact of coronavirus. 

It's clear the issue of client vulnerability is a key priority.

The Financial Lives survey found that the number of UK adults with characteristics of vulnerability had increased from 46 per cent in February 2020 to 53 per cent in October.

What do we mean by vulnerable?

A vulnerable customer is someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.

The FCA notes not all clients with characteristics of vulnerability will be vulnerable.

But it says these people may be more likely to have additional or different needs, which if not met by firms, could limit their ability to make decisions or to represent their own interests.

The FCA also highlights that consumers may not want the label 'vulnerable' applied to them.

Its suggestion instead is for firms to focus on what harm or disadvantage clients may be vulnerable to, and how they can respond appropriately.

The four drivers of vulnerability

The four drivers of vulnerability remain unchanged in the final guidance: health, life events, resilience and capability.

Yet the examples of each have been redefined or expanded, as we highlight below:
Health Life events Resilience Capability
Physical disability Retirement Inadequate income (outgoings exceed income) or erratic income Low knowledge or confidence in managing finances
Severe or long-term illness Bereavement
Poor literacy or numeracy skills
Hearing or visual impairment Income shock Low savings Poor English language skills
Mental health condition or disability Relationship breakdown Low emotional resilience Poor or non-existent digital skills
Addiction Domestic abuse (including economic control)   Learning difficulties
Low mental capacity or cognitive disabilit Caring responsibilities   No or low access to help or support
Other circumstances that affect people’s experience of financial services, e.g.  leaving care, migration or seeking asylum, human trafficking or modern slavery, convictions

The FCA points out that the characteristics of vulnerability are likely to be complex and overlapping.

For example, a life event such as a bereavement may lead to further vulnerability such as mental health, which could be further exasperated if the client has low knowledge or confidence in managing finances.

Firms should understand what characteristics of vulnerability are likely to be present among their target market, such as firms dealing with older clients post retirement clients. 

Understanding the scale of vulnerability

The FCA recommends using published material such as data and research to further understand the drivers of vulnerability.

Here are some of the useful resources we've been sharing:


  • Meeting the needs of vulnerable clients
  • The Alzheimer’s Society guide on how to help people with dementia
  • Marie Curie's When someone dies booklet
  • The Association of British Insurers' guide to addressing vulnerability
It's worth being aware how vulnerability can be perpetuated or worsened by either our own actions or inaction.

Vulnerable clients may also be more likely to be susceptible to behavioural biases, so firms should take the time to understand how these biases may present themselves.

Ask yourself what type of harm or disadvantage your clients may be vulnerable to, and how your actions can increase or reduce the risk of harm.

What firms should be alert to

The FCA has provided some examples of harm and disadvantage that firms can watch out for. 

These include heightened stress levels due to difficult or different personal circumstances; increasing time pressures due to additional responsibilities, and noticing where clients are pre-occupied, limiting their ability to manage. 

Other examples include clients less able to process things, perhaps as a result of medical treatment, or lacking perspective, especially when experiencing something for the first time. 

The regulator also highlights changing attitudes towards risk, as people often become more reckless/careless under stress. 

In light of the final guidance, business owners and senior managers should make sure that all relevant staff have the appropriate skills, capability and business support to understand and consider the needs of vulnerable clients.

Staff should understand potential vulnerabilities within their target clients and what this may mean in practice for their role. 

It's worth your team understanding the impact mental health or a disability can have in terms of debt. 

There should be also an awareness of domestic abuse (including economic control), which has both immediate and long-term impacts. 

What you and your team can do

Staff could be encouraged to work with charities, such as becoming a 'dementia friend'.

Alternatively, you may want to ask a charity to carry out staff training or a training needs analysis around how to recognise and deal with vulnerable clients.

Governance has a role to play too, and senior leaders should look to champion a culture that prioritises the fair treatment of vulnerable clients and makes sure their needs are met. 

You may want to have a vulnerable client 'champion' in your business. This person can then provide support to frontline staff and co-ordinate the firm’s approach.

Your team should be able to recognise where the client has told the firm about a need, where there's clear indicators of vulnerability or where relevant information is noted on a client's file that indicates an additional need or vulnerability.

They should also take steps to encourage disclosure where they see clear indicators of vulnerability, but they're not expected to go further than this to proactively identify vulnerability.

Sometimes it may be appropriate for your team to ask for additional support, whether this is escalating the case to the next step in the process, or seeking extra support from specialists. 

Everyone should also be on the lookout for things like:


  • Changes in payment behaviour from the client, such as a sudden stop to payments or late or missed payments;
  • Regular unarranged overdrafts and charges; and
  • Unusual activity on their account.
Warning phrases used by a client may include references to trouble paying for something, contact with a debt adviser or not being able to understand a letter from your firm.

Other signs to watch out for are shortness of breath, signs of agitation or confusion and mention of medication. 
Also, if a client is asking for things to be repeated, this may be a sign that they're not retaining information. 

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Office address: 1310 Solihull Parkway, Birmingham Business Park, Birmingham B37 7YB
Paradigm Mortgage Services LLP is registered in England and Wales. Company No: OC323403. Registered Office: Paradigm House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND
Paradigm Mortgage Services LLP is a Limited Liability Partnership.