Identification of vulnerability is key.
For many years our own regulator, the FCA, has quite rightly given huge emphasis on how we, in the financial services community work with, advise and support clients in vulnerable circumstances. At Matrix Capital we take this extremely seriously and are proud to be early adopters, in 2022 of the Financial Vulnerability Taskforce charter and be members of the Consumer Duty Alliance. Indeed, our MD, Robin Melley, was a founding board member of the FVT.
Good and bad practice.
In December, our regulator, the FCA ran a webinar on its own Consumer Duty guidance, paying particular attention to consumers in vulnerable circumstances, who in their own words, may have additional needs or be at greater risk of harm if things go wrong. In February the regulator also published an update on what firms were doing well and what they could do better. There are some fabulous ideas in there, that we at Matrix Capital have taken on board, from which we felt you might also gain some valuable insight.
Disappointing from the investment arena.
It was discussed in the webinar and revealed in early data collection that the investment market, within the financial services community, however, was failing to prioritise the identification and support of vulnerable customers. Indeed, 49% of portfolio managers and 69% of stockbrokers had identified NO vulnerable customers in their client base. This raised a alarm bells for the regulator and prompted a Dear CEO letter, in which the FCA set their expectations for wealth managers and stockbrokers, pointing out that 50% of us will be classed as vulnerable at some point.
A Dangerous view.
An excellent recent article we read recently on respected financial site Professional Adviser quotes the FCA’s head of consumer investments, using strong and quite damning language, suggesting that investment firms were simply not taking vulnerability seriously enough – “exceptionally concerned that firms are just not thinking widely enough on this topic” and “taking a very narrow and dangerous view.” That view seemingly being far too simplistic, that if a client is wealthy, they cannot be vulnerable. As Jonathan Barrett, the author of the piece states, that is an assumption that is at best ignorant, and at worst, very dangerous indeed.
Frequently clients needing legal advice can be vulnerable.
At Matrix Capital, we are only too aware how important it is to correctly identify and appropriately support any client in vulnerable circumstances, and how many different scenarios can lead to that being the case. Obviously, your own regulator, the SRA has offered you detailed guidance on accepting instruction from vulnerable clients or third parties acting on their behalf and whether it be considering care for a loved one who had lost mental capacity or perhaps experiencing a stressful divorce, you will be dealing with vulnerable clients on a regular basis.
It is why financial planners are vital.
The FCA has been far more complimentary of the financial advisory community and how we have embraced and understood the subject. Many of these clients you have identified as vulnerable will need complementary financial planning and of course this may well require monies to be invested. However, given the FCA’s concerns at the tardiness of the investment profession to take vulnerability seriously, your referrals should be to financial planning professionals ourselves.
Allow us to look after your clients in vulnerable circumstances empathically, as per our charter, and permit us handle and liaise with the third-party investment partners as required.
If you wish to discuss Consumer Duty, vulnerability and the charters we follow as best practice, please get in touch.