The Financial Conduct Authority (FCA) has a clear definition of what constitutes a vulnerable customer. Here, our Trainee Compliance Officer Samantha Davies gives further detail on the FCA’s definition and explains how MPA supports our vulnerable clients.
The FCA’s definition of 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’.
The FCA’s 2022 Financial Lives Survey, conducted as of May 2022, revealed that 52% of adults in the United Kingdom displayed one or more characteristics of vulnerability. Vulnerability isn’t limited to specific actions or interactions; it covers all aspects of life and, is of significance within the financial services sector as the products and services themselves can be complex and confusing.
Everyone, regardless of their background, faces the possibility of becoming vulnerable. However, certain areas serve as key indicators of vulnerability;
- Health – including conditions or illnesses that affect the ability to carry out day-to-day tasks
- Life events – such as bereavement, job loss or relationship breakdown
- Resilience – referring to the ability to withstand financial or emotional shocks
- Capability – involving a low understanding of financial matters or a lack of confidence in managing finances (financial capability). Additionally, low capability in other relevant areas such as literacy, or digital skills can be indicative of vulnerability.
At MPA, we have taken proactive steps to provide our advisers with comprehensive training especially designed to help them identify potential vulnerabilities in clients. However, it is essential to bear in mind that there is no set criteria or checklist for determining vulnerability. Everyone experiences challenging times, and vulnerability can be temporary or permanent. So, while we need to consider the many different circumstances which could lead to a client becoming vulnerable, the possibility of vulnerability should be considered as part of the whole process of delivering advice and ongoing services to all.
We are committed to ensuring that all of our clients have a range of options available to them. These options include, but are not limited to, the choice to have someone else present at meetings, requesting documents in large text, or arranging multiple meetings with advisers to ensure complete understanding and satisfaction with our recommendations. However, there may be instances where a client feels that more support is required.
If any client feels that they would like to have the assistance of a third-party individual that MPA can speak to regarding their investments held with us, we can provide a document called a Letter of Authority for this. This document would need to be completed both by the client and by the third-party to whom access is being granted, and would enable MPA to speak to the third party on behalf of the client. However, this would not permit the individual to take any action, conduct any transaction or sign any document on behalf of the client.
A further important measure that can be considered is the appointment of a trusted individual as their attorney. A Power of Attorney is a legal document that provides authority to a trusted person to allow them to make decisions or take actions on your behalf if you are unable to do so yourself. Various types of power of attorney exist for different circumstances. In England and Wales, the following types apply;
- General or Continuing power of attorney– gives an attorney the authority to make decisions or take actions about your finances while you still have mental capacity. This is sometimes also called an ordinary power of attorney.
- Lasting power of attorney (property and financial affairs) – gives an attorney the authority to make decisions about your finances with your permission or if you lose mental capacity.
- Lasting power of attorney (health and welfare) – gives an attorney the authority to make decisions about your health and care if you lose mental capacity.
- Enduring power of attorney (EPA) – this was replaced by lasting power of attorney for property and financial affairs on 1 October 2007. If you had already made an EPA before this, it will still be valid. Be aware that it only covers property and financial decisions, so you might wish to set up a lasting power of attorney for health and welfare as well. Your attorney must register the EPA if you lose mental capacity.
For residents of Scotland, different options are available;
- Continuing Power of Attorney, which gives powers to deal with your money and property.
- Welfare Power of Attorney, which gives powers to make decisions around your health or personal welfare.
- Combined Power of Attorney, which gives the same powers as continuing and welfare Power of Attorney, so your appointee can make decisions about your money and property, and health and welfare.
If you wish to talk about any of the points mentioned above, please contact your adviser at MPA, or give the office a call on 01564 795 997. For those who may require further support in relation appointing an Attorney, further information has been provided below.
Make, register or end a lasting power of attorney: Overview – GOV.UK (www.gov.uk) (England & Wales)
Your options (publicguardian-scotland.gov.uk) – Power of Attorney (Scotland)
