The FCA has published its business plan for 2019/20 and, as well as identifying immediate and longer term priorities, the plan also looks at broader strategic challenges. These are wide-reaching issues that will have an impact across all sectors of the financial services.
One of these challenges is demographic change.
What is meant by this?
Demographic change refers to the changing nature of the UK population and the differing financial needs of various groups in society. By its very nature, change can be hard to react to, particularly where there is a lack of preparation.
In the business plan, the regulator highlights the different groups in the UK population that will have different priorities and financial resources – for example, Baby Boomers are likely to lead very different financial lives to Millennials. It is hoped that those working in financial services will be aware of and able to adapt to the changing needs of customers.
The FCA has said it ‘will lead a public debate on the intergenerational challenge in financial services’ in 2019/20. This will consider fluctuating financial needs across generations, how the industry might respond to these changes, and how regulation may also need to change.
Another area of focus highlighted in this section of the business plan is customer vulnerability. Firms can expect greater clarity and guidance regarding the identification and treatment of vulnerable customers in 2019/20.
The FCA has stated that they will ‘share some of the good practice we have seen with the aim to improve outcomes’ for vulnerable customers.
A customer might be considered vulnerable for a wide range of reasons. These include:
- Mental health problems
- Low income/debt
- Being under the influence of alcohol and/or drugs
- Changes in their circumstances (i.e. bereavement, relationship breakdown, divorce)
- Financial inexperience
- Low literacy and/or numeracy
This is not an exhaustive list, but it highlights that vulnerable customers are generally those who cannot make rational financial decisions or understand the implications of the decisions they make. Vulnerability has long been a focus of the regulator and clearly this is still an area they are taking an interest in.
For users of the Aviva Development Zone, our course of the month (May 2019) is ‘Assessing Customer Needs’. Having the minimum necessary knowledge of assessing customer needs is requirement for insurance intermediaries under the Insurance Distribution Directive (IDD). It is important to be able to identify what it is that a customer requires which will involve gathering the relevant information from them and evaluating their current level of knowledge. Factors such as financial experience, wealth and vulnerability also need to be considered.