Do you think you are Vulnerable Client? Probably not if you’re a young fit and healthy individual who makes astute business decisions every day of the week or someone who is responsible for others.
But wait a minute. Identifying where a client may exhibit vulnerability is a challenge, and one that the regulator has become more and more concerned about in the last few years.
There is a stereotype that clients are vulnerable through a reason of age, illness or infirmity, or due to a recent traumatic event. What about someone who is young, inexperienced, and may have no knowledge of financial matters.
And what about other not so obvious circumstances. For example, what about those seeking advice to transfer from a defined benefit pension. Would they be considered as being vulnerable?
In 2015, the FCA published an excellent insight into consumer vulnerability which focused on reasons for an individual’s vulnerability and identified good practice in dealing with these clients.
What about someone who is selling their business. These individuals – or families – are typically financially astute, used to taking risks, invariably they have made significant and impactful decisions. Should these individuals should be treated as vulnerable.
Selling a business, for most people, is something they will have little experience in, be of significant impact, and often be tied up with emotion. They need time to think, low pressure, and understanding that inaction can be less damaging than an action that is later regretted
Take Attitude to Investment Risk. The way people respond to information can differ from person to person and most advisers will, when explaining investment risk to their client, use numbers, graphics, verbal explanations as well as written descriptions. Is the same true for other areas of financial advice?
Some will respond best to meetings, but there are those who may not be able to provide their full attention for the period we, as advisers, often command. Some may favour an office meeting where they are free from distractions, others the comfort of their own home. Not everyone may share our command of technology.
Vulnerability changes with time – over the longer term individuals can become more or less able to deal with their financial affairs.
Some advisers have advocated an approach where all clients are treated as vulnerable. After all, giving clients more time to think and having trusted individuals in meetings are things that must be in those individuals’ best interests. But on the other hand, others may find this approach patronising.
And maybe what we are saying here is that, surprise, surprise, everyone is different and that we as advisers have to be acutely aware of this.
Of course, we also have to be aware that we as advisers can be vulnerable as well!