Bridging the vulnerability gap: why fair treatment matters

As brokers, Consumer Duty lies at the heart of our practice. These regulations mandate that firms must act in good faith, avoid foreseeable harm, and deliver good outcomes - with the fair treatment of vulnerable customers laying at the core of each of these principles.

Vulnerability is a topic that the FCA continues to spotlight, having established guidance on what firms should do to ensure customers in vulnerable circumstances experience the same outcomes as those who are non-vulnerable. While the FCA’s review of this guidance in March 2025 identified both commendable progress and areas for improvement, we still have a long way to go. As an industry, we need to continue evolving and improving our processes to ensure we don't fall short of the FCA's expectations.

Defining vulnerability can be extremely subjective, based on individual perceptions and experiences, and could leave many customers at risk of slipping through the net. In fact, some of the most challenging cases may actually lie with customers you’ve been working with for years. While they may not have been classed as vulnerable before, they may have recently experienced a change in circumstances that leaves them vulnerable without you even realising. In essence, you think you know your customers inside-out, but this may actually not be the case.
 
What is vulnerability?

The FCA’s definition of a vulnerable customer as "someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate care". Vulnerability can affect anyone, regardless of age, income, or education, as defined by the FCA's four triggers: health, life events, resilience, and capability. Each of these can limit an individual’s ability to make decisions, placing them at greater risk of harm. 

While historically, this perception was often limited to severe physical or mental illness, the interpretation is actually much broader, and is not simply a case of one-size-fits-all. According to Comentis, around 20% of customers that mortgage brokers liaise with identify as vulnerable and require additional support. It’s also rare for just one factor to contribute to vulnerability. They typically present with two to three vulnerabilities, while older customers, especially those seeking lifetime mortgage options, often have more (averaging closer to seven). 

For instance, a customer who has recently experienced bereavement and is struggling with grief might have difficulty concentrating, processing complex information, or making sound financial decisions regarding a mortgage application. Their emotional state, a result of a significant life event, makes them vulnerable to negative outcomes if their broker doesn't adapt their approach accordingly. Other examples include someone with low financial literacy or dyslexia who may struggle to comprehend information, or someone facing job loss, leading to financial and emotional stress.

Complementing this, the latest FCA Financial Lives survey reveals that approximately 1 in 10 adults (4.8 million) are in poor health. A concerning 58% of this group struggle when interacting with financial providers or managing their finances. Common health-related vulnerabilities include alcohol dependency, diabetes, learning difficulties, mobility issues, and hearing impairments. 

How do we define fair treatment? 

With vulnerability so widely defined, the process is made even more difficult when it comes to identifying this confidently and accurately. We can’t always expect customers to be forthcoming about their vulnerability, especially given the FCA’s research recently revealing that only 4 in 10 customers have disclosed their needs to their financial services provider. 

We need to be building a complete picture around all our clients to have the best chance of mitigating the difficulties they face - most notably, a heightened awareness of hidden vulnerabilities such as stress, anxiety, and trauma. Customers may mask these during interactions, leading to them going unnoticed, so actively listening, remaining patient, and creating a safe space that encourages open communication is a must.

First, we must have a solid understanding of fair treatment and what it entails. At its core, it is built upon several key principles:

● Empathy and respect: Approaching interactions with genuine understanding and without judgment. A major example is using proactive questioning, where open-ended enquiries are employed to uncover potential vulnerabilities without being intrusive. Coupled with this is active listening, where close attention is paid to verbal and non-verbal cues like tone of voice or body language.
● Adaptability: Our communication and processes must be tailored to individual needs, rather than rigidly applied irrespective of circumstances. 
● Clarity: Proactively use plain language and avoid jargon to bridge potential comprehension gaps.
● Flexibility: Adapting appointment times, offering various communication channels, and adjusting the pace of interaction allows customers to engage comfortably. 
● Accountability: Ensuring identified vulnerabilities and the specific actions taken to accommodate them are thoroughly recorded. This requires having a solid awareness of referral pathways to specialist support organisations, like mental health charities or debt advice services. When dealing with vulnerable customers, this is crucial and demonstrates a holistic approach.

Just as there is no one-size-fits-all when it comes to defining vulnerability, we must remain open-minded and be able to adjust our approach for every customer to ensure they receive the same positive outcomes as someone who isn’t vulnerable. It all boils down to ensuring that advice, products, and services are not only fit for purpose, but are also delivered in a manner that genuinely supports their individual circumstances, mitigating the risk of detriment and promoting positive outcomes.

What are examples of good practice? 

Good practice starts and ends with being able to identify behaviours that would indicate a customer as being vulnerable. This could include,but is not limited to, identifying a difficulty to process information, emotional distress, or unusual communication patterns.

In its latest review, the FCA highlights key examples of good practice from firms supporting vulnerable customers, which they encourage brokers to implement and action if they haven’t already done so:

● Using data to pinpoint where vulnerable customers are experiencing poorer outcomes.
● Providing flexible, tailored support, underpinned by comprehensive training on identifying and assisting vulnerable individuals.
● Reviewing and improving the clarity of messages, tailoring communications, and ensuring they are delivered promptly for full customer understanding.
● Incorporating feedback from panels and focus groups into product design and review processes, considering how vulnerable customers use products.

What challenges remain? 

While many firms have made positive progress in supporting vulnerable customers, challenges still remain. As we’ve established, vulnerability is a difficult concept to get right. Given its complex, evolving nature, it requires continuous learning and adaptation. Consequently, there’s always something new we can be learning and improving when it comes to best practice and ensuring good outcomes. The FCA identified shortcomings in how firms address vulnerable customers, including:

● A lack of clear definitions of "good outcomes" for vulnerable customers, failure to effectively measure these outcomes using data, and a lack of adequate escalation/action on identified issues.
● Insufficient training to identify vulnerability or encourage disclosure, leading to delayed or inappropriate support.
● A struggle to provide accessible communication channels and frequent failure to test if vulnerable customers truly understand the information provided.
● The needs of vulnerable customers are often not integrated into product and service design processes, exacerbated by a lack of relevant training.

What are the potential implications around fee charging for vulnerable customers?

With many broker firms operating on a fee-charging model, we need to be aware of the potential traps that could be incurred as a direct result - more specifically, how fee structures could inadvertently or deliberately disadvantage vulnerable individuals.

Potential exploitative practices include charging excessive fees for relatively simple advice when a customer is highly susceptible to influence, either due to stress or a lack of understanding. Similarly, charging for unnecessary services or a lack of transparency regarding fees, particularly for those with lower financial literacy, raises red flags. Furthermore, applying standard fees to a complex case that demands substantially more time due to a customer's vulnerability, without clear justification and agreement, can also be deemed unfair. 

To mitigate these risks, brokers must be able to justify their fees, demonstrating that the value provided is proportionate to the charge, particularly when dealing with vulnerable clients. The onus is firmly on the broker to ensure the customer fully understands and consents to the fees, and that the advice genuinely serves their best interests. Failure to adhere to these principles carries severe reputational and regulatory risks, including fines, public censure, and even the withdrawal of authorisation.

Why fair treatment matters

In today's mortgage market, understanding and responding to vulnerability isn't merely a case of best practice - it’s the gateway to ensuring customers receive the best possible outcomes for their needs. Having an open-minded mindset as to what vulnerability truly means allows us to better support customers through what is one of the most important purchases of their lives. It’s about building trust, encouraging openness, and ultimately, securing the best possible outcomes tailored to individual circumstances. 

Having a broad awareness and understanding of vulnerability and its ever-changing nature is vital. For this reason, embedding regular company-wide training on customer vulnerability is integral, as it means these practices will become second nature. It also enables us to meet the FCA's requirements for identifying vulnerable customers, aligning with Consumer Duty. Failing to correctly identify and support vulnerable clients can not only lead to poor customer outcomes, it can also incur severe regulatory breaches, hefty fines, and lasting reputational damage.

By further enhancing your understanding of vulnerability, not only will you better protect your customers, but also safeguard your mortgage business. Firms that proactively support vulnerable customers will not only build a stronger reputation, but also foster loyalty and open communication - both of which are essentials in an increasingly competitive market. In essence, the fair treatment of vulnerable customers isn't a mere box-ticking exercise; it's about developing an ongoing awareness, and placing honesty, adaptability, and empathy at the heart of every interaction.