February 06, 2017
How to identify vulnerable clients? Who is a vulnerable client?
Vulnerability is an inherently complex area and this overview simply seeks to summarise some of the key indicators, as well as highlight some of the risks and benefits of being able to work with these clients, and support them effectively. We consider those groups of individuals seeking advice in retirement who might fall into this definition.
Principle A common misconception is that a vulnerable client is simply someone affected as a result of advanced aging.
However, this is a broad definition and to put some context on this, it means vulnerability could:
• manifest itself in either a physical or mental form
• incorporate a condition which is short lived or longer term or permanent
• encompass an emotional or financial shock (e.g. bereavement or a drop/loss of income)
• incorporate more than one element (multi layered) and could fluctuate over time. This definition suggests it could affect anyone, confirming this will impact on numerous clients seeking or in receipt of financial advice. In many cases there is an element of subjectivity on whoever is attempting to make an assessment. There is no expectation that advisers must become quasi-medical professionals when dealing with clients. However an awareness of some indicators that may cause someone to be treated as vulnerable is required.
Size of the issue
Given the range and extent of vulnerability it should be clear that this is a significant issue. To illustrate the full scale of this subject, it’s important to consider the following:
• one in seven adults has literacy skills that are expected of a child aged 11 or below
• just under half of UK adults have a numeracy attainment age of 11 or below
• almost half of adults do not have enough savings to cover an unexpected bill of £300
• Dementia affects 1 person in 6 over 80 Why is this important? Well apart from demonstrating best practice, failure to correctly manage a vulnerable client can result in reputational damage and complaints.
For example the Law Society of England & Wales, the Local Government Association and the NHS, are amongst a range of organisations (including charities) who have an expansive definition of a vulnerable person, and publish a range of policy and guidance notes in order to help them discharge their responsibilities.
Practice
Many organisations (including the FCA and Citizens Advice) suggest vulnerability can be identified by understanding risk factors. Below are some risk factors which could point to vulnerability.
Risk indicators (not an all inclusive list) These may include:
• low literacy, numeracy and financial capability skills
• heavy reliance on others for support/care
• communication difficulties (English not being a first language, limited speech etc.)
• physical disability/brain injury
• severe or long-term illness (e.g. cancer)
• mental health problems
• dementia/loss of mental capacity
• low income and/or debt
• caring responsibilities (including operating a power of attorney)
• being ‘older old’ for example over 80, although this is not absolute (may be associated with cognitive or dexterity impairment, sensory impairments such as hearing or sight, onset of ill-health, not being comfortable with new technology)• being young (associated with less experience)
• change in circumstances (e.g. bereavement, divorce, job loss)
• non-standard requirements (e.g. care-home leavers, recent immigrants) In some cases it may be quickly apparent that a potential vulnerability factor exists, for example someone with a physical/ sensory disability. Other risk factors are likely to be hidden and can only be identified following more in-depth client interaction (such as identifying a long term illness where the use of appropriate questions enable a client to explain their medical background). It’s important that advisers feel confident about being able to openly and effectively discuss risk factors with a client in order to ensure their needs can be met, and any disadvantage managed effectively. This may involve developing techniques to mitigate vulnerability. This might include considering how long, which location, and what time of day a client can be seen, or suggesting the inclusion of a third party to support them. By way of example, focusing on one area of vulnerability may help highlight some of the adviser considerations. It’s an area that later life planners will often encounter, that of a client’s mental capacity.
Mental Capacity The framework for assessing capacity in England and Wales can be found in the Mental Capacity Act (MCA) 2005. This asserts the presumption that an adult has capacity to make decisions. As such it has to be proved that someone lacks capacity.
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