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Financial vulnerability: using technology to identify and support those at risk

by wrich
Editorial & Advertiser disclosure

By: Jonathan Barrett, Co-founder and CEO of Comentis  

For millions of people in the UK, the past 18 months have presented a number of significant challenges. The COVID-19 pandemic has affected almost everyone in some way – be it through illness, loss of loved ones, redundancy or an upheaval in working and living patterns under the oft-cited ‘new normal’. 

From a financial perspective, the pandemic has indeed been crippling. The Government attempts to contain the virus through restrictions and the various lockdowns brought economic activity in many sectors to a complete standstill, leading to millions of people to find themselves in a state of financial vulnerability.

According to the Financial Conduct Authority (FCA), there are almost 28 million financially vulnerable adults living in the UK, a figure that was less than four million before March 2020. It is a harrowing finding, and a problem that financial institutions and advisers can help to tackle by stepping up their diligence processes and re-thinking the way they assess their clients. 

This can be achieved by bringing in more continuous and consistent checks to ensure both that customers are financially resilient enough to maintain their current repayments and that those asking for additional products are in a position to do so. Not only is this vital for the wellbeing of the customer, but also for the advisers themselves. As more clients become vulnerable, advisers will need to demonstrate to the regulator that they have considered and recognised their needs. 

Act now

Identifying vulnerable clients has been a growing priority for the sector in the past few years, but it’s a task that is accompanied by significant challenges. Vast numbers of people have suffered losses in income through redundancies and being placed on furlough schemes. Plus, while there has been significant government support over the course of the pandemic in the form of stamp duty and mortgage payment holidays, these are now beginning to taper off. 

The long-term financial consequences of the pandemic therefore remain for many, and this sort of financial shock has been recognised by the FCA with its new regulations concerning vulnerability coming in earlier this year.  

The FCA describes a vulnerable person as somebody who, because of their personal circumstances, is “especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care”. This covers a variety of situations and characteristics, including low resilience to cope with financial and emotional shocks. 

Many of the tell-tale signs of financial vulnerability can be difficult to identify, however, especially in cases where individuals try to hide their situation or do not recognise the vulnerability in themselves. Determining such a position is also a naturally subjective process in which one financial advisor may declare a client as vulnerable while another may not. 

Helpful technology 

Fortunately, technology can help to make this picture a lot clearer, and therefore make it much easier to identify vulnerable clients. Digital platforms like Comentis’ Cognitive Assessment Engine, for example, can combine vast clinical expertise and sophisticated data to present a fact-based assessment of individuals and their circumstances. 

By integrating existing technologies, processes and knowledge bases in this way, advisers will be able to base their assessments on a range of facts and expert insights in real-time. Put simply, digitalising the process means advisers are more likely to make the right decisions and not let anyone fall through the cracks.

Advisers are already used to looking for signs that a customer may be struggling, of course, but even the most experienced professionals need support, particularly when the pandemic has created a whole new set of pressures. Using technology to inform these assessments not only brings objectivity, scalability, and consistency to the process, but an evidence-based assessment process also provides advisers with a clear and consistent audit trail. 

At a time of mounting regulatory pressure and a growing number of vulnerable consumers, deploying solutions that will support advisers in the identification and triaging of these clients has never been more important. After all, failing to identify vulnerable customers is a considerable risk for brokers, firms and advisers who may need to provide evidence that shows why a client may – or may not – have been deemed vulnerable. 

By leveraging the power of technology, advisers can demonstrate due diligence to the regulator and, most importantly, ensure their clients receive the extra guidance and support when they need it most. As a result, this approach will deliver the best outcomes for all concerned.


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