The Financial Conduct Authority (FCA) has published the first in a new series of mission statements, which aim to provide a more in-depth explanation of its approach to regulation.
The first document, FCA Mission – Our Future Approach to Consumers, includes a clearer definition of ‘vulnerable customer’ which will enable the authority to take a more nuanced approach to this issue, recognising that people’s circumstances can change.
To improve the way it targets its interventions, the FCA has provided four categories of vulnerability, drawing on its recent Financial Lives Survey of 13,000 UK adults:
- Health: 5% of adults say their ability to carry out day-to-day activities is significantly reduced through health conditions or illness.
- Resilience: The exposure of consumers to plausible increases in interest rates and prices, or a small change in their circumstances. The FCA identified 30% of UK adults as having 'low financial resilience'.
- Capability: those with 'very low knowledge of financial matters or low confidence in managing money'. The FCA identified 17% of UK adults as having low capability.
- Life events: divorce, redundancy or bereavement within the last 12 months, which had happened to 19% of UK adults or their partner, according to the FCA study.
The research suggested that as many as 2.2 million consumers are at risk of increased harm from financial shocks and have also experienced a major life event in the past year.
The regulator said that firms should 'pay attention to possible indicators of vulnerability and have policies in place to deal with consumers who may be at greater risk of harm'.
Members may want to review the document to ensure that their business processes reflect the FCA’s more detailed guidance.