The FCA recently addressed the wealth management sector at the Personal Investment Management & Financial Advice Association’s (PIMFA) Vulnerable Client event, reiterating their expectations for identifying and supporting clients in vulnerable circumstances. With a key focus on Consumer Duty, the FCA is actively reviewing firms’ practices to ensure fair treatment and good outcomes for vulnerable clients, with findings expected by the end of 2024.
Key Issues in the Wealth Management Sector
Graeme Reynolds, the FCA’s Director of Competition highlighted a concerning trend: the wealth management sector identify significantly fewer vulnerable clients compared to other sectors – only 5% among portfolio managers and less than 1% among stockbrokers, based on data provided by firms in the FCA’s 2023 Wealth Survey.
Reynolds challenged the sector to consider why this disparity exists, questioning if bereavement, ill health, and other vulnerabilities are being adequately recognised for a meaningful proportion of clients.
In 2022, the FCA’s Financial Lives survey, highlighted that nearly a third of UK adults with £50,000 or more of investible assets had at least one characteristic of vulnerability.
FCA expectations of firms
- Identification
The FCA expects firms to establish processes to identify clients who may need additional support or whose needs may not be fully met by standard service offerings. This requirement applies to all firms involved in distributing products to retail customers, regardless of direct client engagement. - Support and understanding
Firms should assess why clients use their services and ensure the client journey—from initial engagement to ongoing support—aligns with client needs. Communications should be clear, easy to understand, and, when necessary, tailored to address clients’ circumstances.
Additionally, client service should be empathetic and adaptable, acknowledging that vulnerabilities can change over time. - Monitoring and Evaluation
Firms are expected to evaluate what constitutes a “good” client outcome and use data to ensure that clients are receiving the intended service. The FCA encourages open communication, urging firms to engage if they need clarification or encounter potential issues in identifying or supporting vulnerable clients.
How FMConsult Can Help
FMConsult can provide a range of expertise to help provide professional support to you in the development or review of your policies, procedures, management information and monitoring, in relation to identifying and supporting clients with characteristics of vulnerability.
Please contact us via email at info@fscom.co
Further information
The full version of Graeme Reynolds speech can be accessed by using this link: https://www.fca.org.uk/news/speeches/vulnerability-not-buzzword
This post contains a general summary of advice and is not a complete or definitive statement of the law. Specific advice should be obtained where appropriate.
