MorganAsh has welcomed a recent intervention from the Financial Conduct Authority (FCA), calling for firms to be proactive when identifying customer vulnerability.

The regulator has for the first time called on firms to be proactive, and not just reactive, with customer vulnerability and said that a “notable” number of firms had vague or undeveloped processes for identifying customers with characteristics of vulnerability or lower financial capability.

According to the FCA a reactive approach increases the risk of poor outcomes for consumers, particularly those in vulnerable circumstances who have historically been more susceptible to harm.

When speaking with firms, the FCA mentioned how some had “considered vulnerability” but couldn’t provide details on how this translated into practical changes or measurable outcomes.

These calls from the regulator have been welcomed by support services provider, MorganAsh, which has long advocated that firms use both proactive and reactive approaches when identifying and managing customer vulnerability.

MorganAsh research has suggested that firms using reactive methods alone are typically identifying between 1-5% of vulnerable customers – far short of the 50% figure established by the FCA as part of its Financial Lives survey.

“We welcome the regulator’s call for proactive, as well as reactive approaches – something we have been campaigning on for some time now,” managing director of MorganAsh, Andrew Gething, commented.

“The findings from the FCA’s review show that many firms are still relying too heavily on customers to disclose their own vulnerabilities, or on staff to identify issues only once they are visible. In practice, this reactive approach means most vulnerable customers remain unidentified and hence unsupported.

“Where firms rely solely on reactive methods, they typically identify vulnerable customers in the single figures and fall far short of reality. They also fail to gather the quality of data needed to understand the extent of vulnerabilities and what outcomes they are receiving. Ideally, reactive methods should use the same classification methodology to ensure consistency in the data captured, regardless of the method.”

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