Financial advisers in the UK greatly underestimate how many clients could qualify as vulnerable and what features would put them in this group, research by Technical Connection, part of St James’s Place, revealed.
The survey of 100 advisers found that on average, they estimate 18% of clients qualify as vulnerable – translating to approximately 11.7 million people in the UK. But according to Financial Conduct Authority (FCA) research, the number of adults considered to be financially vulnerable is 28 million – more than double than adviser’s calculations.
Technical Connection said this creates a vulnerability gap.
In the last six months, only half of advisers polled carried out any formal work to assess which of their clients may be in a vulnerable position.
On top of that, their interpretation of the vulnerability spectrum “remains limited” with 60% of advisers recognising just half of vulnerability-related conditions, the firm said.
Missing the mark
But the lack of awareness does not stop there.
Technical Connection found that just over half (52%) of advisers have formally engaged with members of staff to discuss vulnerability and how to identify it, and what kind of support and solutions should be provided to clients that show signs of vulnerability.
But when asked about what type of processes they have in place to present information and tailor their approach according to vulnerable clients’ circumstances, less than a third (32%) had specific practices in place to address these issues.
At the same time, awareness of regulatory responsibility to address vulnerable clients is significantly high with 94% of advisers recognising it. Yet nearly one in four (24%) believe that the requirements are over-burdensome.
Clients are ‘slipping through the cracks’
Edward Grant, director at Technical Connection, said: “Client vulnerability is a critical issue that is only going to become more prevalent due to the current cost of living crisis. Our research highlights that many clients with vulnerable circumstances may be slipping through the cracks.
“Work needs to be done to ensure spotting and supporting clients with vulnerability issues is a natural part of the process.”
Carla Brown, managing director at St. James’s Place senior partner practice Oakmere Wealth Management, added: “As a financial planner, I’m convinced that it’s essential to have formal processes for dealing with vulnerable clients.
“Not only is it the right thing to do as a responsible business, but it also makes good commercial sense.
“By failing to identify and work with vulnerable clients in the right way, you run a reputational risk.
“However, get it right and it can positively impact your relationship with a client and, in turn, create a strong advocate for your business.
“When clients find themselves in a vulnerable situation, this is your opportunity to really make that difference and be the safe pair of hands they need.”
