Around three quarters (72%) of UK financial adviser firms have rules in place to support vulnerable clients, according to new research commissioned by insurance giant Prudential.
The survey also found only 14% of firms would refer clients showing signs of cognitive decline to specialist advisers, as the sector responds to the growth in inquiries about later life advice.
A vulnerable client is defined by the UK regulator as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”.
Prudential commissioned the survey of 101 financial advisers in the UK during June and July 2018.
Vince Smith-Hughes, retirement expert at Prudential, said: “Later life planning is a major and growing part of advisers’ business and firms need specific processes to ensure older and vulnerable clients are supported.
“It is possible that many firms don’t have client bases where there are high levels of vulnerability. However, establishing links for example with a solicitor to provide power of attorney services, and also a care consultant specialising in provision of care specialising in all the options available could greatly benefit advisers – particularly if they aren’t dealing with these types of clients on an everyday basis.”
Need for training
Clients are continuing to make important financial decisions in later life and firms are recognising the need for specialist training to enable advisers to address potential issues.
Prudential’s research found about half (47%) of firms train staff to spot signs of cognitive impairment.
More than two out of five firms (43%) questioned say they monitor for signs of unusual or concerning behaviour among clients.
Prudential’s Smith-Hughes admitted that he was impressed that adviser firms were starting to develop “processes to protect the interests of older clients” by providing training for staff to spot signs of cognitive decline.
Specific processes
However, Prudential’s survey found nearly one in five firms (17%) have no specific processes for dealing with or spotting issues with cognitive decline, while 27% of firms say the assess client issues on a case-by-case basis.
Around half (50%) of firms said they already had processes in place to deal with potential issues from older clients managing income drawdown in later life.
While 28% said they have started reviewing processes given the increase in the use of drawdown following the launch of pension freedoms.
Third-party attendees
The survey found rules and procedures being adopted by 42% of firms include insisting that third-parties such as younger family members or legal representatives attend any meetings with clients who are considered vulnerable.
More than a quarter (27%) of firms insist all clients aged 75 and over are seen with a third-party present, with 15% imposing a general rule that clients over 80 should have a third-party present.
Smith-Hughes did state that despite the advancements being made by financial advisers, “more needs to be done”, because he believes “cognitive decline and its impact on the advice market will continue to grow increasing the responsibility for advisers to respond”.
