Cost of Living: How firms can support customers in financial difficulty

As the cost of living continues to rise, more families are being put under pressure to cut back on non-essential spending, even those who had previously been unaffected are beginning to feel the pinch. In May last year, the number of UK adults with low financial resilience increased by 2.2 million – up from 10.7 million compared to 2020. With the FCA scheduled to publish a full Financial Lives 2022 survey report over the next few months, it is predicted that the numbers will have increased.

The financial sector has an important role to play in supporting their customers through this difficult time. The arrival of the Consumer Duty in two months’ time also means that firms will need to ensure – if they are not already doing so - that they are doing enough to deliver good outcomes for retail customers, offer fair value, and provide their customers with the right information they need to make good financial decisions. This includes vulnerable customers, such as those with low financial resilience.

Supporting customers in vulnerable circumstances

Firms will need to demonstrate that they are proactive in their efforts by having the right support systems in place for their customer journeys to remain clear and transparent. Having tailored support rather than a blanketed “one-size-fits-all” approach will ensure firms are meeting each individual’s needs. In instances where firms are unable to provide the right support, then firms can suggest an alternative, or offer a referral to customers who need debt advice.

Customers who are experiencing financial difficulty may also be struggling with their mental health, thus are more likely to display characteristics of vulnerability. This makes it important for firms to be able to recognise vulnerabilities and to take them into account when dealing with their individual needs.

Customers who are already struggling financially are potentially more susceptible to scams, with fraudsters taking the opportunity of the cost-of-living crisis to mislead people who are already vulnerable into parting with their savings. The FCA have announced that they have stepped up their ScamSmart campaign to help customers to spot the warning signs. Firms can also assist by warning customers of scams they may encounter when searching for the best offers on their investments as well as helping them to be aware of the consequences of any decisions they make in cancelling and renewing protections they may need.

Achieving good outcomes for customers in financial difficulty

For firms to achieve good outcomes for their customers, they should:

• understand the needs of their target market/customer base, including the characteristics of vulnerability in their customer base and the impact of vulnerability on their consumers.
• respond to customer needs throughout product and service design, as well as taking practical action towards flexible customer service provision and communications. 
• monitor and evaluate whether the firm is meeting and responding to the needs of customers with characteristics of vulnerability and make improvements where this is not happening.

Lastly, firms should also acknowledge the importance of training staff so that they have the right skills and capability to recognise and respond to the needs of customers in vulnerable circumstances. In addition to this, firms should also aim to foster a healthy culture across the organisation where delivering good outcomes for customers - whether vulnerable or otherwise - is recognised as important.

Users of the Development Zone can find a range of Consumer Duty courses in their course catalogue, including:

• Consumer Duty – An Introduction
• Consumer Harm: Identification, Prevention, and the Consumer Duty
• Customer Service: The Channels of Communication

Our course of the month for April is Consumer Duty: The Consumer Principle Explained. Why not test your knowledge today?

For those not currently using the system, you can find out more and request a free 14-day trial here: https://mydevelopment.zone/#getStarted