FCA releases its review on the treatment of vulnerable customers

Following the FCA’s March 2025 announcement, and with the regulator’s vulnerability work ongoing, what should firms be doing to better protect their vulnerable customers and ensure they are not falling short of expectations?

The FCA has published its findings following its review of the treatment of vulnerable customers.

The review involved engagement with consumer organisations, trade associations and academia, the FCA’s Financial Lives Survey, a firm survey and multi-firm outcomes monitoring across the various financial services sectors.

The findings, published on 7^th March, focus on firms’ standards, but also whether current rules remain fit for purpose in light of Consumer Duty.

In addition to this, the FCA has released its quarterly consultation paper on handbook amendments. A notable proposed change is the amendment to DISP, which aims to clarify the eligibility of complaints made against firms with whom the complainant has an indirect relationship. This is particularly relevant for beneficiaries or individuals with a beneficial interest in personal or stakeholder pension schemes, who may well be interacting with the rules while being in a vulnerable circumstance.

The good and bad

1. Effective data utilisation
   The review highlights that only a small number of firms effectively used their data to identify the worst outcomes their customers were experiencing. However, there was evidence of firms providing flexible and tailored support, with enhancements in frontline training on vulnerability. Additionally, there is a trend towards firms improving their communications to ensure clarity and timeliness, thereby enhancing customer understanding.
2. Ineffective outcomes monitoring
   Many firms struggled to demonstrate how they effectively monitor and take action on outcomes for customers in vulnerable circumstances. The FCA frequently uses this term instead of ‘vulnerable customers’. The main issues identified were:
   • A lack of a clear vision of what good outcomes look like and how to measure them
   • Failure to escalate issues or make changes when problems are identified
3. Inadequate support for staff
   There was a notable lack of support for staff to identify customers in vulnerable circumstances, insufficient encouragement for customer disclosure, and a failure to provide prompt and appropriate care within their support systems.
4. Poor communication Firms often failed to provide appropriate or accessible channels for customers and lacked testing for consumer understanding.
5. Insufficient training and embedding of consumer needs Most firms could not demonstrate how they had embedded the needs of customers in vulnerable circumstances into their product and service design processes. There was also a lack of vulnerability training for product and design staff.

Immediate actions for firms

The report lays out a set of principles that firms can use to understand their own approach and begin to address any limitations to their treatment of vulnerable customers:

• Define good outcomes: Clearly articulate (and document) what constitutes a good outcome for customers in vulnerable circumstances. This is likely to differ between products, while characteristics of different vulnerabilities will require different treatments in order to deliver the right standard of outcome
• Utilise quality data: Use high-quality data to understand and monitor outcomes for vulnerable customers. Ingesting data from various different stages of the sales and product lifecycle, including tapping into the rich repository of data which exists within complaints, can help you build a detailed and accurate view of your performance and your vulnerable customers’ specific needs (which should then feed into product design)
• Establish escalation processes: Develop clear processes to identify and address poor outcomes promptly. As is always the case with vulnerability, identification is one part of this issue, but identification must also prompt appropriate and proportionate action.
• Implement improvement strategies: Create strategies to continuously improve the support and outcomes for vulnerable customers. This is again reliant on data and the story it tells, but also how you govern your business to ensure that this data has a platform – does leadership seek and align to this kind of insight? Are they ‘bought in’ to the need to document the actions you take to protect vulnerable customers?
• Evaluate actions: Regularly assess the effectiveness of actions taken to address poor outcomes and make necessary adjustments. Aligned to the above, once the data which sheds light on performance is established, is it then used to prompt actions, established through structured governance, with accountability for any actions assigned and monitored?
• Engage senior leadership: Aligned to all of the above, ensure that senior leadership is actively involved in overseeing and improving outcomes for customers in vulnerable circumstances.

The FCA will continue to drive its vulnerability agenda, and this will mean something different to every firm for whom vulnerability rules apply.

There is often an argument from areas of the industry that principles-based regulation creates vagaries for firms to manage, however, in response to an issue which manifests itself differently across customer circumstances, firms who stick to this set of guiding principles – as well as ensuring buy in at the top level – will navigate the evolving landscape with greater success.

The FCA has published additional detail on getting things right for vulnerable customers, which can be found here.