On 7 March 2025, the Financial Conduct Authority (FCA) published its findings following a review into how firms are supporting customers in vulnerable circumstances and whether existing vulnerability guidance remains appropriate considering the Consumer Duty. It found that while many firms have taken positive steps towards supporting vulnerable customers, leading to good practices across various sectors, there remain areas for improvement. In the article below we share our insights on the FCA's findings and some key considerations for firms going forward.
On the 7th of March 2025, the FCA published three critical publications aimed at enhancing the financial services industry's support for vulnerable customers:
- FCA's review of firms' treatment of customers in vulnerable circumstances;
- Examples of good practice and areas for improvement to help firms support customers in vulnerable circumstances; and
- Consumer research report: Understanding outcomes for consumers in vulnerable circumstances.
These publications followed from a multi-firm review undertaken by the FCA to understand how firms are supporting customers in vulnerable circumstances and whether the FCA's vulnerability guidance remains appropriate since the Consumer Duty came into force.
This article delves into the findings of the review, highlights good and poor practices, and outlines some key considerations for firms moving forward.
FCA's Multi-Firm Review: An Insightful Evaluation
The FCA's review had a dual focus: to evaluate whether firms were providing appropriate support to vulnerable customers and to assess if the FCA's 2021 vulnerability guidance needed updates in light of the Consumer Duty.
A startling finding from this review was that 44% of vulnerable customers reported negative experiences with financial services firms, compared to 33% of non-vulnerable customers. This discrepancy highlights the need for continued and enhanced efforts to support vulnerable consumers.
Governance: A Mixed Bag of Practices
Governance emerged as a critical area with mixed practices. On the positive side, 79% of respondent firms reported that their senior leadership actively reviewed governance arrangements, processes, and systems. Furthermore, 70% of firms acknowledged their senior leadership's responsibility in delivering good outcomes for vulnerable customers. However, a concerning poor practice identified was the lack of engagement, challenge, and direction from some senior leaders. Additionally, while most firms had established organisation-wide vulnerability policies, only 39% had formal governance bodies or committees overseeing and influencing outcomes for vulnerable customers.
Consumer Support: Clarity and Timeliness
In terms of consumer support, firms excelling in this area ensured communications were clear, written in plain English, and delivered in a timely manner. These firms tailored communications to their target markets or customer bases and offered channels that met the particular needs of customers in vulnerable circumstances. However, the FCA's consumer research indicated that customers in vulnerable circumstances felt underserved by their financial service provider's communication channels.
Products and Services: Room for Improvement
The review highlighted a significant gap in the design of products and services with the needs of vulnerable customers in mind. Good practices included product design teams engaging with third parties, such as charities for specific disabilities, to gain relevant knowledge when reviewing and designing products. Yet, areas for improvement were evident, as product and service design staff rarely received vulnerability training, and only 54% of firms with training in place for non-frontline staff had guidance on how vulnerability relates to their specific roles.
Key Considerations for Firms going forward
Although the FCA concluded that its FG21/1 guidance remains appropriate and helpful alongside the Consumer Duty, firms should note that these publications especially the good practice and areas for improvement publications have the effect of supplementing FG21/1 and firms should review their practices in light of these publications.
Several key questions firms can ask themselves include:
a) When testing your products do you test their impact on vulnerable customers?
b) What does a good look like for a vulnerable customer or customers with additional needs?
c) What does a good outcome look like at the different stages of the customer journey – for instance, pre-sale, post-sale?
d) What does a poor outcome look like?
e) How robust is the data you gather from distributors and third parties in your distribution chains? What does that data tell you?
f) Even when you take action to improve outcomes, do you consider improvements across the whole product and service and customer journey?
g) Do you assess the effectiveness of the actions taken? - it's not enough to take action
h) Do you have a governance body overseeing and influencing outcomes for vulnerable customers? (smaller firms could have a simpler structure)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
