“A fifth of the firm's clients were aged over 80 and 42 per cent held under £30,000. Many of these clients, sitting outside the firm's target market, were paying high fees, but did not seem aligned with fair value.
“In some cases, these fees were as much as 65 per cent of the client's portfolio for one year. So as well as being concerned about whether fair value was being provided, terms of service clearly weren't being communicated in ways easy to understand.”
Reynolds said it was important for firms to understand it was “highly likely” they had some clients with vulnerable characteristics and that they needed to consider which made a client vulnerable and to understand what procedures needed to be implemented to support the delivery of good outcomes for those different aspects of vulnerability.
“It is important to understand that current system restrictions are not a justifiable reason not to start to make those changes. Improved systems can be introduced in a timely and manageable way while effort is made to implement effective workarounds until that is complete.
“Lastly, understand the need to monitor and evaluate how effectively your approach is working in practice, using data to test outcomes are being achieved and determining appropriate metrics to provide a baseline to track against and adjust,” he added.
What the FCA want
Reynolds highlighted how one of the criticisms of the regulator was that it was “long on diagnosis and short on prescription,” and so laid out a few things the FCA wanted firms to do.
He said: “We want you to, on identification, to put processes in place to identify those who may need more help, or to recognise those engaging with your services, where they may not meet their needs. This applies to all firms, with or without direct client engagement on support and understanding.
“We want you to consider why people are using your products and services, what their goals are, and how the client journey you provide, from promotion to ongoing client service supports them to be realised. We want you to issue clear, easily understood communications and promotions so people can make informed decisions, tailoring them when necessary.
“We want you to evolve well trained, empathetic client services that appreciate vulnerabilities aren't fixed, that circumstances change and that you might need to adapt to as a result. And on monitoring and evaluation, we want you to think pragmatically and proportionately about what a good client outcome is.”
Reynolds also urged firms to come to the FCA if they had an issue, he wanted firms to be more open with the regulator.
“We want to work with you together to help improve on this. We want you to digest the work we published, and will publish on how the consumer duty and vulnerability guidance is being implemented elsewhere, considering what lessons there might be for you.
