The FCA’s Vulnerability Review has given us some much-needed insight into how well firms are applying the Consumer Duty outcomes, and whilst there are some real positive changes and progression in the industry, it feels like this isn’t the majority and there’s still sticking points and areas of real challenge for firms.  

Some firms showed good examples of efforts taken, such as in-house training to improve identification and disclosure, and improving communications through a testing and continuous learning process. But firms particularly struggled to evidence the embedding of vulnerable customers into the design process of products and services, or effective monitoring of good outcomes. 

The enabler for firms to successfully do these things requires their analysis and understanding of their target market or customer base and it seems this is where firms are falling short.  

In our Vulnerability Campaign, we’ve been exploring the difficulties in identifying vulnerability where vulnerable circumstances are less apparent and so this is another reason why this analysis is vital. But within the Duty and beyond, what are the benefits to consumers and the firm for assessing the target market or customer base? 

Identifying what ‘good’ looks like 

Firms need to know what they’re aiming for. What experience do they want their customers to have? How do they want customers to feel about their firm? The truth is that you won’t please everyone, but you can certainly make every effort to by understanding who your customers are. What are their needs and wants? What are their characteristics, including those of vulnerability?  

If firms can analyse and understand their customers, they can be equipped to clarify what good outcomes should be achieved for those customers, what behaviour from the customer is expected and what the customers’ expectations are. On the other side of that, a firm can be clear on what behaviour isn’t expected from a customer, when does something feel ‘off’ and what would a poor outcome look like. 

Let’s think about the Retirement journey where the customer demographic could find themselves in a variety of vulnerable circumstances – be it physical or mental capability or financial stress. When the journey towards retirement starts, you might want to initiate a conversation with the customer about their options and aid them in finding advice or guidance. When you provide the customer with their retirement pack, the expected outcome may be that the customer contacts you to discuss their options and next steps. If a customer doesn’t contact you however, this could signal that the customer doesn’t understand something or perhaps doesn’t feel they have the capability or means to get in touch which would be a poor outcome.   

Underpinning inclusive design 

Understanding the needs of the customer base or target market can help a firm work toward an inclusive design process when looking at not just products and services, but communication and processes too. 

The customers’ needs and expectations can set the requirements for firms to build and test against which will lead to more effective and inclusive design strategies. For example, does the customer base want to read through a 6 page detailed Annual Statement? Do they have the time and capability to digest and understand all the information? Or do they want a summary of the Statement and a means to easily access the detailed Statement should they require it? 

Build trust 

Disclosure of a vulnerability will always be a challenge due to the transient nature of some vulnerabilities. If firms can provide their customers with products and services which are inclusively designed to meet their needs, this can build real trust between customers and their provider and encourage disclosure. The FCA’s research showed us that where customers did disclose, they received noticeably better outcomes.  

Continuous learning 

With clarity on good outcomes, and product and services designed around customers’ needs, firms can agree on metrics and implement effective MI to monitor and track if those outcomes are being achieved.  

So, if customer contact is expected after a communication is released, this can be monitored and reported on. And if reporting shows customer contact isn’t where it should be, the communication and process can be reviewed, refined and re-tested to continuously learn about their target market or customer base and continuously improve their offerings.  

Tackling the advice gap 

Advice firms taking up the FCA’s Targeted Support Framework will need to have completed this analysis of their customer base. Understanding who their customers and segmenting them into groups will enable them to provide them with personalised and effective support. 

Analysing and understanding the characteristics and needs of your target market or customer base isn’t just a tick-box activity for compliance with the Duty. There are true, wider-spanning benefits to both the consumer and the firm when the analysis can be used in the right way and underpin a firm’s offerings.  

Is your firm struggling to embed your Vulnerability capability or need help to better understand your customers? Simplify Consulting can help analyse your target market or customer base and apply our comprehensive Vulnerability Framework. Get in touch by contacting us at [email protected].  

Natasha Bridgewater

Wealth Consultant