Wealth managers and advisers face ‘major challenges’ in dealing with vulnerable customers

Wealth managers and financial advisers are at risk of ‘failing’ vulnerable customers and face major challenges in dealing with them, according to a study by Huntswood.

The UK-based consulting and customer solutions firm found that a growing proportion of the UK population was vulnerable, with many unaware of their vulnerability.

Huntswood said it had identified significant challenges for the wealth management and financial adviser sectors if firms failed to recognise and support vulnerable customers, amid expectations from the Financial Conduct Authority (FCA) that firms continue to improve practices and outcomes.

Some wealth management firms reported less than 1 per cent vulnerability among their client bases, which Huntswood said suggested they were not identifying those at risk.

Its research found that 51 per cent of customers were now classified as vulnerable, up from 44 per cent in 2023, while 53 per cent were unaware that they were vulnerable.

Huntswood warned that wealth managers risked offering overly complex products that vulnerable clients may struggle to understand.

It proposed several strategies to help wealth managers mitigate the risk of failing to support vulnerable clients.

The firm recommended implementing a framework and education programme across companies and training staff on vulnerability; simplifying communications; enhancing suitability checks and conducting regular reviews of client circumstances, risk tolerance, and product suitability; and introducing ethical training to help staff prioritise client interests and recognise vulnerability signs.

“Failure to support vulnerable customers presents a very real risk to wealth managers and financial advisers,” stated Huntswood CEO, Martin Dodd.

“Organisations must act now to ensure they are able to identify their vulnerable customers and deliver appropriate levels of service, not just because it is what the FCA expects, but because it is the right thing to do.

“The good news is that there is an increasing awareness from wealth managers of the circumstances that might make an individual vulnerable or require additional support.

“This increase in awareness is, in part, due to the proactive steps some wealth managers are taking to ask customers about their needs and prompt self-declarations.”



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