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How to approach reviews: the task that defines firms

Connections Magazine Q2 2023

Protecting the vulnerable: navigating the evolving regulatory landscape in a post-pandemic world

AKGAKG’s latest industry research paper explores key issues relating to vulnerable customers and financial wellbeing. As a key part of this project, AKG have again carried out market research exercises with adviser and consumer samples to ensure the paper is informed by these fresh research findings and themes.

Vulnerable customer

definition - “A vulnerable customer is someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.”

Source: FCA, FG21/1 - Guidance for firms on the fair treatment of vulnerable customers.

Financial wellbeing 

definition - “For us at the Money and Pensions Service (MaPS), financial wellbeing is about feeling secure and in control. It’s about making the most of your money from day to day, dealing with the unexpected, and being on track for a healthy financial future. In short: financially resilient, confident and empowered.

People who experience financial wellbeing are less stressed about money. This, in turn, has positive effects on their overall mental and physical health, and on their relationships.”

Source: MaPS.

Here, AKG’s Communications Director Matt Ward takes a canter through key findings and themes:

  • Whilst vulnerability can occur across age groups there is still an association with retirement and later life planning decisions being a vulnerable event/time for those involved.
  • Advice firms are concerned that the servicing of vulnerable customers will push costs and resource requirements higher. Ditto for Consumer Duty.
  • Awareness of and interaction with the development of financial wellbeing as a concept appears more widespread amongst those workplace advice firms interacting with employers. The challenge here is trying to track exactly what use is made of such services by employees.
  • Whilst financial advisers do recognise it to a degree, their main focus is typically at a financial planning level with clients. But it may be the case that financial advisers wish to also give the development of a client’s financial wellbeing more prominence given the focus on delivering value via the Consumer Duty requirements.
  • And there are signs that advisers are developing financial wellbeing as the bedrock of what they do and seeking to articulate this more – as suggested by growing perception of the future role of financial coaching.

However, and as previously outlined concerns linger that there are very large parts of the

population who do not engage with advice and guidance and therefore are beyond the scope of financial wellbeing approaches.

  • The fact that financial wellbeing and vulnerability apply enormously to the debt side of the financial balance sheet should also be acknowledged.
  • General levels of preparedness for the FCA’s vulnerable customer regime amongst those advice firms interviewed by AKG were decent and they were in lockstep with the FCA’s good intentions with this area of regulatory development and focus (and had generally found the FCA supportive throughout), but there is a feeling that this is a case of successfully reaching the ‘start line’ with much still to play out from here and plenty of challenges still to come.
  • Some advisers do therefore have concerns about implementing their vulnerable customers strategies effectively in the field beyond the preparation and planning phase of the work. From here on there will still be plenty of areas where providers and other specialists, be they compliance or specifically vulnerable customer focused, can help advice firms meet the challenges of servicing vulnerable customers.
  • In particular further support and training around the identification of vulnerable customers and associated servicing requirements will be needed. There will also be requirements around monitoring, recording and reporting on service interaction with vulnerable customers in terms of building robust proof points and audit trails.
  • Sentiment around the building momentum of preparatory requirements for Consumer Duty adherence feels different. Those advice firms interviewed by AKG recognise this as being something of ‘a beast’ and acknowledge the time/ resource drain involved in getting ready. And only half of those surveyed feel they are well prepared for Consumer Duty with the remainder admitting they are unprepared and could do better. Again, help will inevitably be required from providers and other specialists to support advice firms with preparation for and adherence to the Consumer Duty.
  • It is difficult to argue with the key tenets and intentions of the vulnerable customer and Consumer Duty initiatives and their impact on the industry can already start to be seen. These key regulatory developments will dominate adviser and provider worlds during 2023 and 2024 and beyond, but it is vital that the impact of this focus and these energies is felt outside of the financial services vacuum in terms of improved perception by consumers.
  • To some extent the direction feels quite positive, in terms of the aligned objectives of advisers and the regulator in particular and the way they chime with needs of customers. But this is not to understate the challenge though, given a context of a lack of understanding by customers and the circumstances that consumers find themselves in.
  • The recently announced intention by the FCA to review advice in the retirement income market might also carry a sting in the tale during 2023 when findings are revealed and also carries relevance to the outcomes based intentions of Consumer Duty and of course will consider retirement income choices made by vulnerable customers.

What overarching conclusions can be drawn?

Two long-standing items for the industry to address are yet again highlighted as conclusions in this latest AKG research paper:

1. Improved financial education

We need to cultivate better levels of financial awareness and education amongst UK consumers, across age groups, gender and ethnicity. This will in turn help to build knowledge and resilience in consumers and also help to smooth their engagement with different financial services industry touchpoints. Whilst this is of vast concern to the industry, it is not always seen as their role to address it. Providers and advice firms can complement and build on strategic government/education initiatives, because it is harder to try to build them independently. There will be huge pressure on MaPS budget and resources to fulfil all their requirements for consumers.

  1. Filling ‘the advice gap’

We know from this body of research and many others that a wide range of consumers need more help when it comes to understanding and making financial decisions. Access to affordable financial advice remains challenging for the majority of consumers and so outside of the mainstream advice market financial services needs to continue to widen the availability and access to useful information, guidance and advice (and ‘yes’ the definitions of each still matter and need further clarification to boost development opportunities).

Acknowledging the evolution of vulnerability

  • Beyond the previous two, the industry needs to acknowledge that the rising cost of living has changed consumer behaviour – with heightened anxiety around financial decision-making considerations and an associated impact on financial confidence more widespread. Consumer research has highlighted the three most notable behavioural changes as being a more cautious nature, affordability to save and a focus on short term needs. The definition of and scope for vulnerable customers has evolved and broadened as a result of the pandemic and subsequent cost of living crisis, as well as via the FCA framework. Advisers are realising that this might range from physical or mental health related issues to circumstantial/situational life events, such as bereavement, separation/ divorce or job loss/redundancy.

Get in touch

*For access to its full content, this AKG research paper, sponsored by Fidelity, RBC Brewin Dolphin and Standard Life, can be downloaded at https://www.

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