Re-framing vulnerability and focusing on good consumer outcomes

At TISA’s Vulnerability Conference earlier this week, it was clear that the industry is still grappling with the concept of vulnerability, including what it means for financial products and services, and for the consumer journey. In this article, we highlight a few of the learnings from the day. 

One of the clearest messages, which was at the heart of most of the day's discussions, is that firms need to be embedding meaningful considerations about consumer vulnerability into every aspect of their consumer-facing products and services. Another similarly strong theme, was how to re-frame the concept of vulnerability into something more positive. A focus on the positive, and an accompanying mindset shift, could achieve better outcomes in this space. 

Good outcomes – the regulatory lens

The FCA’s contribution to the conference made it beyond clear that firms are expected to deliver good outcomes to all consumers, including those that are in vulnerable circumstances. Key takeaways for firms included the need to:

• understand vulnerability in their existing and target markets;

• consider how consumer vulnerabilities may shift and develop during product or service lifecycles;

• take a proactive approach to identifying consumer vulnerabilities; and

• adapt their products and services to ensure that vulnerable consumers receive good outcomes notwithstanding their vulnerabilities.

The regulator’s key message was that while the Consumer Duty has brought a renewed focus to this area, there remain areas for improvement. Significantly, the regulator stated that while firms must be able to evidence what they are doing to ensure good outcomes, it is the outcome on which they are focused. A well evidenced poor outcome is still a poor outcome.

Misunderstandings about vulnerability 

One aspect that particularly stood out was how nuanced vulnerability can be. There is a very broad range of factors that could cause vulnerability, such as poor mental or physical health, bereavement, poor financial understanding or certain life events. There are also different manifestations of, and different severities of, vulnerability. The often-used phrase “no one size fits all” could not be more pertinent than it is here. Some factors may cause vulnerability temporarily (such as a traumatic life event), but the impact of such an event on a consumer may well reduce over time. Sometimes multiple factors can be present simultaneously, such as poor mental health and poor financial stability, leading to a form of intersectionality. Sometimes, a vulnerability may exist, but in real terms have no or limited impact on the consumer’s ability to handle their financial or other affairs.

Crucially, the presence of a vulnerability flag may not necessarily mean that the consumer is actually vulnerable. For example, a flag on file that a consumer has experienced a divorce is not enough in and of itself to enable a firm to deliver an appropriate response to that flag. Without asking the consumer for more information, it is not possible for the firm to understand the impact of divorce on the consumer’s life. The divorce may be recent, a long time ago, a shock, causative of other vulnerabilities, or (for some) an opportunity to move on to a better life. The ability of firms to gather data to support their understanding of what vulnerability means in practice is therefore key to enabling and ensuring the suitability of how they deal with it for the consumer concerned and ultimately reach a good outcome.

 The importance of data

It remains that some firms are still underestimating the number of their consumers that are in vulnerable situations. There could be a number of reasons for this that could include: 

• a failure to meaningfully engage with what vulnerability means or that it might exist within a firm’s client base; 

• a lack of understanding as to the possible causes of vulnerability and who it could affect; or 

• firms waiting for consumers to raise these needs themselves rather than be approached about them. 

On that last point, customers are not well known for approaching their financial services providers to tell them all about their vulnerabilities. However, in a preconception busting reveal, consumers are surprisingly happy to engage with proactive attempts from firms to find out how their needs could be better served. One firm spoke about a voluntary consumer survey, which had very high engagement levels, including from consumers aged over 80 years of age who might not therefore be deemed “tech savvy”. This puts a marker down relative to the importance of firms taking a proactive approach to find out how vulnerable circumstances might be impacting their consumers. 

Another interesting discussion focused on the impact of terminology on messaging around vulnerability. Is it, for example, a word that firms should be using directly with consumers? Likely not. Firms must apply some significant thought to their consumer-facing communications to ensure that these land appropriately. Within a firm, the impact of language was also noted as significant. If, for example, you change your internal messaging and up- or re-skilling from empathy to compassion, that has the potential to drive a more forward-thinking and problem-solving approach that will ultimately feed into positive messaging and positive outcomes being delivered to customers.  

Improving communications

Poor literacy and numeracy levels are among the largest vulnerabilities present in adult society today. Some of the statistics are astonishing but need to be faced head-on in order to make real strides along the journey of delivering purposeful change:

• a staggering half of UK adults only have numeracy skills at primary school level – that’s 20 million adults;

• 6 million adults in the UK have poor literacy skills; and 

• 1 in 5 adults experience “maths anxiety”. 

What this means in practice, is that very many consumers are likely to have difficulty understanding or engaging with communications about financial products and services. One anecdote revealed that even something relatively everyday like a payslip or utility bill (which should be simple and easily understood), can cause confusion. It is important to note here that the blame for the confusion should not land entirely on the reader, the source of the confusion will lie in the creator of it, and it is vital therefore that firms address their communications styles and strategies. 

This is a theme that was also discussed at TISA’s Inclusive Investing Conference, held earlier this month, which took a deep dive into the impact of jargon-filled and non-contextualised investment disclosures. We explored some of the key themes considered at the conference, including overlaps with vulnerability. We also explored in a recent post on vulnerable customers and financial communications that consumers often make decisions in “fast‑thinking” mode, while disclosures wrongly assume that they are being read by a person applying slow, analytical engagement.

A key practical step will be for firms to adapt their financial communications to accommodate the reality of the engagement and concentration levels of the reader and take steps to delivering the most important messages in the most impactful way. 

The importance of engaging with the voice of lived experience

Perhaps one of the strongest messages from the day was the importance of listening to and taking account of real and lived experiences at every possible lifecycle stage of product and service delivery. 

An understanding of real-life lived experiences can challenge our assumptions and understandings of how vulnerabilities manifest and how those who live with them actually want or need to be helped. Often, what customers need is not what firms think they need. This is a gap that it is important for firms to acknowledge and address. For firms that can do this and get it right, there can be a strong commercial advantage. It is fairly well known that those who have been shown care and understanding, where once they were underserved, will remain loyal customers. An interesting statistic recently in the news and related to just one possible shade of vulnerability was that approximately 70% of widows switch financial advisor after the death of their spouse. Think, just for a moment, about what might lie behind that statistic.

You can read more thought leadership like this by subscribing to our monthly financial services regulation update. If you would like to speak to one of our financial services experts, we would be happy to discuss this in more detail. 

Written by Kerry Berchem and Emily Williams