The FCA's review of firms’ treatment of customers in vulnerable circumstances
The Financial Conduct Authority (FCA) has undertaken a comprehensive review of how firms treat customers in vulnerable circumstances, assessing the effectiveness of existing guidance and the impact of the Consumer Duty.
We believe that the top three take aways for firms are:
- Firms need to “step outside of procedure” to provide appropriate solutions for customers in vulnerable circumstances.
- Product manufacturers are not believed to be providing bespoke training to their product teams on the impact of vulnerability on product design.
- “most firms were unable to affectively monitor outcomes for customers in vulnerable circumstances”. Given the FCA’s focus on data and monitoring this is a theme that we would expect them to return to, together with the observation that firms had gaps in their data from distributors / third parties in their distribution chain.
In this article we summarise the findings from the FCA's review and analyse their examples of good and poor practice.
FCA's review approach
The FCA's review aimed to evaluate firms' actions in supporting vulnerable customers and to assess the relevance of existing guidance under the Consumer Duty. The review involved gathering data from various sources, including multi-firm reviews, interviews with stakeholders, consumer research, and analysis of Financial Lives survey data. The FCA focused on understanding the actions firms have taken, the outcomes experienced by vulnerable customers, and stakeholders' views on the Non-Handbook Guidance.
Findings from the review
The review revealed that while many firms have made positive progress in supporting vulnerable customers, challenges remain, particularly in areas such as product and service design, staff training and outcomes monitoring. The Consumer Duty has driven a renewed focus on delivering good outcomes for vulnerable customers, but the Financial Lives survey data indicates that these customers, especially those with multiple vulnerabilities, may not consistently receive outcomes as favourable as other consumers.
At a webinar held on Tuesday 11 March 2025, the FCA said they are generally pleased with the progress that firms have made on their treatment of customers in vulnerable circumstances, but there is room for improvement. They accepted that this is a difficult thing to get right as vulnerability can be dynamic and requires continuous learning and adaptation.
The FCA said that customers need more support and encouragement to disclose any additional needs, there needs to be more flexibility in support processes and more consumer testing should be done.
Examples of good and poor practice
Based on the review, the FCA published examples of good and poor practice in support of customers in vulnerable circumstances.
Key areas of good practice include:
- Effective use of data: Firms that effectively monitor outcomes use high-quality data (management information, MI) to understand the experiences of vulnerable customers and make evidence-based improvements. Senior leaders are genuinely engaged with this data. At the 11 March webinar, the FCA suggested bringing MI to life with “customer stories”.
- Tailored consumer support: Providing flexible and tailored support, including training frontline staff to recognise and respond to vulnerability, is crucial for delivering good outcomes. Some firms are using AI to identify characteristics of vulnerability. At the 11 March webinar it was suggested that vulnerability can change over time and firms should consider it as part of each customer interaction.
- Clear communications: Ensuring communications are clear, timely, and tailored to the needs of vulnerable customers helps them make informed decisions. At the 11 March webinar examples were given of firms using publicly available resources to improve their communications and using feedback from customers’ lived experiences.
- Incorporating consumers’ experiences into product and service design: Incorporating feedback into product development processes and considering how customers in vulnerable circumstances used their products as part of product reviews (i.e. the feedback loop) and, as suggested at the 11 March webinar, in product/service idea generation. For example, good practice is including detailed questions on vulnerability in product reviews e.g. whether MI indicated that customers in vulnerable circumstances were more likely to take out a given product or incur fees.
Key areas for improvement identified by the FCA include:
- Ineffective outcomes monitoring: Many firms struggle to effectively monitor outcomes for vulnerable customers, often due to poor quality data and unclear escalation processes. The FCA has set out outcomes monitoring ‘prompts’ to help with this (see below). Senior leaders are not always genuinely engaged in
this MI. Also the threshold for RAG rating was not always supported by strong rationales, meaning that firms may not have set appropriate risk tolerances. - Failure to give appropriate support: Some firms fail to support staff in order to identify signs of vulnerability, fail to encourage customer disclosure and respond swiftly to customers' needs, which can lead to poor outcomes.
- Failures in communication: Some firms fail to provide appropriate or accessible channels to customers in vulnerable circumstances and do not test consumer understanding. Firms that stick too rigidly to fixed processes may fail here. Some firms fail to record and appropriately act upon information about a customer’s needs.
- Product and service design: Firms need to better incorporate the needs of vulnerable customers into their product and service design processes and train relevant product development staff on vulnerability. Please let us know if this staff training is something you would like specific support with, we have supported clients on this in the past.
How can firms better monitor outcomes for customers in vulnerable circumstances?
Where firms are struggling with outcomes monitoring, the FCA has provided the ‘prompts’ below to help develop meaningful MI to monitor outcomes effectively.
Prompts:
- Clearly define customer outcomes e.g. What does 'good' look like for customers with additional or different needs?
- Identify actions to achieve these outcomes e.g. How does the support and information customers need differ for those with different needs or characteristics?
- Identify a suite of metrics to monitor outcomes e.g. Where part of this journey is outsourced, what data is needed to test whether this outcome is being delivered via the outsourced service provider?
- Identify consumers experiencing poor outcomes e.g. Is the product meeting customers’ financial objectives?
- Investigate and where needed, take action e.g. What is the driver(s) behind poor outcomes? Is it the product itself, communications around the product or the support provided?
- Evaluate customer outcomes to test effectiveness of action e.g. How should we monitor data to identify whether outcomes improve, for example how often to review data, who is responsible for this?
What actions should firms be taking now?
The FCA's review highlights the importance of continuous improvement in supporting customers in vulnerable circumstances. We recommend that firms take a look at their product journeys – from product design through to outcomes monitoring – through a lens of a customer in vulnerable circumstances and assess whether you are meeting the examples of good practice.
The FCA will continue to engage with the industry to drive further improvements and support firms in meeting the expectations set out in the Consumer Duty. They are hosting a roundtable for wealth managers and stockbrokers at which the FCA’s key focus on vulnerability will be a topic.
Whilst some easing of the Consumer Duty requirements is anticipated (the FCA have removed the requirement to have a Consumer Duty Champion, for example), we do not anticipate that the expectations around customers in vulnerable circumstances will be eased. Indeed, vulnerability (along with price and value) is a key focus of the FCA.
The FCA will not be updating the Consumer Duty non-Handbook Guidance, despite some firms and experts suggesting potential areas for improvement. They have concluded that the Guidance remains appropriate and helpful as a separate resource alongside the Consumer Duty.
Please get in touch with one of our Consumer Duty team if you would like to discuss.
