Updated: Nov 30, 2022
A consequence of ensuring vulnerable customers obtain just as good outcomes, the thread running through the Consumer Duty, is now crystalising and indeed has the potential to affect all firms in a distribution chain. But, if fair outcomes to the financially vulnerable are to become a fundamental part of financial services and for industry professionals to be able to make truly informed decisions on customer vulnerability, all parties will need to work much more closely together. To do this, I believe they will need to share their vulnerability data more smartly. This sharing of data will be paramount to ensuring a good customer experience.
I understand that this raises issues around the dangers of sharing data, specifically around UK GDPR. In fact, I have lost track of how many times I have been asked how advisers can execute their duties and discharge their responsibilities to a product provider in accordance with the FCA’s requirements (and now policy under PS22/9) in respect of vulnerable customers, whilst also remaining UK GDPR/Data Protection Act (DPA) 2018 compliant. But it needn’t be such an arduous task. In this piece, I will explain how this can be done safely, compliantly and with customer experience very much at its heart.
Individual circumstances call for individual identification
It is undisputable that aggregated data sets on vulnerability, which the Customer Duty infers they may be, simply don’t cut it when meeting the other objectives of the Duty. This is because firms deal with individuals. Of course, there may well be easily identifiable categories of vulnerable circumstances, such as bereavement, disability, or redundancy. However individuals, by their very definition have incredibly individual circumstances and cannot be grouped or categorised. It should also be noted that vulnerable circumstances rarely manifest themselves alone, in fact the average identified number of combined circumstances is currently running at 2.4. Additionally, there are difficult vulnerable circumstances that must also be identified if the FCA guidance is to be met in the Consumer Duty, such as cognitive ability and resilience, both of which makeup a customer’s ability to understand.
With this in mind, I believe we need to change the narrative about aggregated data sets to identify vulnerable circumstance and instead be mindful that vulnerability assessments have to be carried out at an individual level in order to meet the requirements of the Consumer Duty.
Disrupting customer experience
But this is where a customer’s experience can be disrupted, especially when there is a distribution chain. Here’s a real-life working example to demonstrate this. Let’s assume all firms in the distribution are using a fit for purpose vulnerability identification and reporting solution, rather than attempting to do it manually through training.
The first part of the chain, who may well be a mortgage adviser, asks the customer in their factfinding process to take a “profile survey” on an app that takes approximately 10 minutes. The adviser then sources a lender and submits their application. Under the Consumer Duty the lender is also obliged to identify and report on any vulnerabilities found to ensure that a good outcome is achieved. This could well be performed on a different platform or using the same tool, but whatever the case, the customer would have to go through the whole process again. If the customer doesn’t meet lending criteria and the application is turned down by underwriting, the adviser will then need to ‘rebroke’ the case to a new lender, who will also have a vulnerable circumstance identification tool that the customer must complete. This lender may also use a servicing company for origination, which will also require a vulnerability assessment. Should the application be accepted, the customer may decide to take out some protection insurance. This will then lead to another vulnerability assessment and so forth. The list can go on and on. And all the while the customer can get very frustrated and upset at having to do the same assessments time and time again. Ultimately even if all the assessments come out with the same result, it can be a very inconvenient and repetitive process for the end customer and can often add to their already vulnerable state. This doesn’t help anyone.
Sharing throughout the distribution chain
This is where the concept of sharing vulnerable data becomes imperative to good customer experiences. In sharing data, the initial contact, the adviser would conduct the assessment, and then share the findings throughout the distribution chain. The key to ensuring that this sharing relationship works is transparency, disclosure, ensuring customer understanding and discharging responsibilities efficiently and effectively. A correctly and well worded privacy template will also be essential too. If the privacy or fair processing notice of the adviser is drafted correctly, and the terms of business with all the lenders are adequate, then all should be well.
Of course, I can understand firms wanting to be in control of the quality of their vulnerability assessments and the easiest way to overcome this inconsistency is to use accredited clinical solutions. I believe it will soon become obligatory to use an industry standard in order to facilitate great customer experience. UK GDPR and Data Protection has always had the ability for firms to share sensitive personal data, as long as the privacy statement includes explicit consent and provider, or distributor agreements are adequate.
The underlying message here is that industry professionals must all work much closer together to ensure a more joined up approach from the off and provide the end customer with a better experience. A long-term, collaborative solution by all parties is required here. And it must be one that will hold up to regulatory scrutiny long term to put the customer first.