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November 25, 2022

Financial vulnerability: it can happen to us all

No matter who they are, anyone can find themselves in a situation where life takes them outside their comfort zone.

Whether it’s a temporary upset such as being made redundant, or going through a divorce – or a more permanent one such as a long-term illness – we can all feel vulnerable at times.

What does this have to do with finance, you might ask? Well financial advice can be complicated at the best of times; if people are feeling vulnerable, it can feel even more so. This is when having good financial advice is more important than ever.

That’s why there’s currently a huge focus within the financial advice profession to ensure we’re all doing enough to help clients who may be in vulnerable circumstances

What is financial vulnerability?

It’s easy to jump to conclusions when we hear the word ‘vulnerable’. We might think of somebody who’s elderly or frail. Or maybe has a condition such as Alzheimer’s, that limits their capacity to make financial decisions.

But while those two examples certainly count, vulnerable circumstances extend much further.

As we mentioned at the start, it might be something temporary. A bereavement, losing your job or going through a divorce for instance. It could also be something positive, such as winning the lottery or receiving a life-changing inheritance.

Any of these situations might leave people more at risk of being misguided: they might be more vulnerable to scams (the promise of an investment scheme that seems too good to be true and probably is) or a high-pressure salesperson trying to coerce them into a quick decision.

Vulnerable circumstances can also leave people susceptible to financial abuse, where a partner or close family member might be restricting access to their money or using their finances for coercive control over them.

Whatever the client’s personal situation, in these instances, as advisers, we have an even greater duty of care. It’s our responsibility to make sure we’re doing everything to meet our clients’ needs.

What we’re doing to help

An important distinction to make is that vulnerability relates to circumstances – it’s not a personal judgment on a client. And in most cases, small adaptions to the way we already do things can make the world of difference.

So, for a client who is struggling at the moment to understand certain aspects of their financial planning, we make sure we provide copies to their nominated relative as well.

For another, who’s visually impaired, we offer braille versions of documents and the option of recording meetings to play back later.

Meanwhile, with another client, who is recently separated, the changes we’ve made have been to give them more time and space to make decisions. Recognising that their partner historically took responsibility for their money, we’ve made sure to schedule additional meeting time in our appointments for extra questions, and we allow more time between appointments so they can process the information, and make calm, considered decisions.

The Financial Vulnerability Charter

For the most part, clients won’t notice much of a difference in the way we conduct our regular business.

But beneath the surface, we’ve taken steps to ensure all our advisers and support team are educated on how to spot vulnerable characteristics, and what action to take. These checks are built into the regular questions and records we keep such as alternative contacts, or death nomination forms.

One of the most significant things for us is signing up to the Financial Vulnerability Charter.

To raise the profile of this issue, and to support advisers the Financial Conduct Authority (the body that regulates financial advice firms) has developed a Financial Vulnerability Taskforce. This includes a Charter which is underpinned by nine commitments.

They are to:

  1. …make our advice easier to understand
  2. …place your interests above all else
  3. …understand how your circumstances might make you vulnerable
  4. …not make assumptions – treating all clients fairly
  5. …not label you – vulnerability is about circumstances, not a judgement on the person
  6. …be sensitive – we are all at risk of being in vulnerable circumstances
  7. …adapt our processes and maintain your confidentiality
  8. …ensure our staff are knowledgeable and appropriately trained – all members of Sutherland Independent are fully trained to spot the signs of vulnerability and
  9. …take appropriate action if you are in harm’s way – such as inappropriate pressure from a third-party of financial scams

To find out more visit www.fvtaskforce.com.

Knowing our clients

As an independent firm of financial planners, we have advantage of knowing our clients personally. We pride ourselves on knowing when things aren’t right – for example, if a normally outgoing client seems quieter in a meeting, we can have a conversation with a relative to make sure things are ok.

Signing up to the Financial Vulnerability Charter doesn’t mean a drastic change to our business, but by following its commitments, we’re making a promise to ensure any client who finds themselves in vulnerable circumstances will be helped through important, potentially life-defining decisions with sensitivity and respect.

As ever, please let me know if you have any particular financial concerns that require assistance and we can arrange to meet and discuss.

November 25, 2022