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Compliance tip of the week: Treating vulnerable clients fairly

It is important to recognise that vulnerable clients require additional consideration and protection from potential detriment throughout the business relationship. The fair treatment of vulnerable clients is a key area of interest for the FCA and it would be prudent for firms to carry out a vulnerability strategy review.

When assessing an individual’s vulnerability, close attention should be paid to whether practices throughout the product lifecycle meet regulatory expectations. Key areas to focus on include:

  • Marketing and promotion: Promotional communications with clients should be fair, clear and not misleading, as well as provide sufficient information to allow clients to make informed decisions. Consideration should be given to the client’s level of financial capability and knowledge.
  • Product/service design: Ensure that when designing a product or service it takes into account the possibility that client’s circumstances may change over time, altering their status.
  • Sales: Sales practices that exploit behavioural biases should not be used. You should take time to explain complex terms and not use jargon or language that is difficult to understand.
  • After-sales relationship: You should present no unreasonable barriers to clients post-sale and ensure you keep up to date on changing circumstances.

As an adviser, you should already have processes in place to ensure you take into consideration your clients’ individual needs and circumstances. Identifying and effectively handling vulnerable clients is an additional step that you will now need to take as a matter of course.

Kevin Parkinson is director of advisory services at The Consulting Consortium



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