Top 10 myths of implementing customer vulnerability management
Many firms’ progress on customer vulnerability is hampered because they base their decisions and strategies on myths. These myths persist despite robust evidence to the contrary.
MorganAsh has been assessing and helping vulnerable people for over twenty years. We look at these myths and why they are wrong.
One can easily assign vulnerability identification to front-line staff or intermediaries. Well, assigning assessment, identification, classification and recording customer vulnerability to those teams may be easy, but doing it is far from easy. Front-line staff and intermediaries are already busy with their core roles – expecting them to assess the numerous types and severities of customer vulnerabilities, without system support, isn’t just optimistic, it’s unrealistic, no matter how good the training.
Customer vulnerability is a binary issue: people are either vulnerable or not. In reality, customer vulnerability is a range – people aren’t either sighted or blind, for example. Almost every characteristic of vulnerability ranges from slight to severe. Both the characteristic and the vulnerability need to be understood, otherwise you’d treat everyone as equally vulnerable. You wouldn’t send braille documents to someone who is colour-blind – this may be a trite example, but it shows the flaw in binary thinking.
People are inherently and always vulnerable. In fact, people have characteristics of vulnerabilities, and there are circumstances which may lead them towards a potential harm – depending on the interaction you have with them. Someone who can’t understand numbers well (the characteristic) may well cope with most of life and a lot of situations, but when needing to make a financial investment (the circumstance) they are potentially at harm if the interaction does not take into account that vulnerability – for example, providing the numeric information in a clear and understandable way, or ensuring that it is explained and understood.
Customers are fearful of questions about vulnerabilities and won’t engage on health and lifestyle issues. This is simply not true. MorganAsh has been assessing and helping vulnerable people for over twenty years and our experience is, that when it is positioned correctly, consumers have no issue with this at all and are happy to disclose information. Indeed, they are more reluctant to talk about money – and financial services firms do this with them all the time.
If we have happy customers, we don’t need to do anything. The FCA requires that firms provide evidence of this. However, a customer can be happy (perhaps with personal service) and not be aware that they have experienced a preventable harm – for example, an underperforming investment, or low insurance payout. Evidence of happiness or satisfaction isn’t necessarily enough.
Adding an ‘is vulnerable’ tick-box in a CRM, with a text field for more information, is enough. This falls short in many ways. If the vulnerability characteristic isn’t recorded, then it can’t be used to collate board reports or for outcome reporting. When another agent reviews the customer, the tick-box and text field is unlikely to be enough. It also engenders poor practice – subjective assessments and the use of inconsistent language. This has the appearance of solving a problem, but it simply creates a bigger one.
We think it’s up to other people in the supply chain (intermediary or manufacturer) and not us. There is a view which says that if someone is doing it, then it is being done – but if both are in some way servicing the customer then both need to know, act on it, and report on it. Assuming someone else is doing it, or it’s someone else’s responsibility is incorrect – Consumer Duty applies to all firms and advisers.
We already have lots of data on our customer, and can add third-party data to this. Almost all of firms’ data is either transactional or financial and does not include the required health and lifestyle data, for example. Inferring vulnerability from third-party data is risky; yes, postcode data can tell you (for example) mortality expectations to some degree, but it can’t tell you exactly who has a terminal illness, is blind or who is recently bereaved. Consumers may also consider themselves as being ‘judged behind their back’ and decisions taken on such data are far from robust.
We must assess and report in the FCA’s categories of health, lifestyle, capacity and resilience. The FCA does not require firms to report on these categories. When assessing consumer characteristics, the categories of health and lifestyle work well – but capacity and resilience are due to multiple factors and so it is easier to assess and collate the contributing characteristics. Making subjective judgements on capacity and resilience isn’t easy; it’s both very difficult to avoid bias and record characteristics with consistency.
At some point the FCA will specify exactly what to do. This won’t happen; the FCA has already moved to principle-based regulations, and this is unlikely to change. The regulations are designed so that firms can implement what will work for them; that doesn’t make them imprecise or vague.
