Firms not doing enough to monitor outcomes and take action to deliver for vulnerable customers, according to FCA report

The FCA has published a review report, which explores how firms support customers in vulnerable circumstances and whether its existing guidance is appropriate, along with examples of good practice and areas of improvement for firms. The regulator also published research (commissioned in 2024), which aimed to find out more about the experiences of vulnerable customers.

Whereas the recent FCA press release focuses on customer disclosures of vulnerability, as discussed in our other article, the other headline for firms is two-fold. Firstly, there will be no new vulnerability guidance or requirements for firms —the current guidance remains active, unchanged, and key to meeting Consumer Duty expectations. Secondly, the FCA found that the majority of firms in the review:

• were unable to monitor or take action on outcomes for vulnerable customers;
• are “not clear on what good outcomes look like”; and
• had not made significant progress on product and service design for vulnerability, and nearly half of firms had not provided vulnerability training to staff in non-frontline roles.

These findings may explain why the FCA’s consumer research found that vulnerable customers experienced poorer outcomes than non-vulnerable customers on almost every service experience measure used and were more likely to report a negative experience with financial services firms.

In relation to its review of firms’ compliance with the Finalised Guidance FG21/1 published in February 2021, and to provide further guidance to firms on how to ensure their care of customers aligns with the Consumer Duty, the FCA has also published a review and good and poor practice examples.

Findings

The good practices and areas for improvements publication sets out the findings of the FCA’s review of firms’ approaches to the Consumer Support outcome of the Consumer Duty. The FCA wants firms to provide a level of support that meets customers’ needs throughout their relationship with the firm. Firms’ customer service should enable customers to realise the benefits of the products and services they buy and support them in pursuing their financial objectives.

Whilst the FCA noted that firms’ current treatment of vulnerable customers has improved since the publication of its Guidance on the fair treatment of VCs, and it had found “many examples of positive actions by firms” and “renewed focus” on delivering good outcomes for consumers, it underscored that firms still have work to do.

The overall findings in relation to good practice involve:

• keeping customers’ needs front and centre;
• proactively understanding the needs of customers;
• reviewing customer journeys to ensure support is easily accessible;
• building a culture that delivers good customer support outcomes; and
• monitoring whether customers are receiving the support they need.

The overall findings in relation to areas for improvement involve:

• aligning support processes to the target market;
• making post-sale support as accessible and effective as pre-sale support;
• embedding a culture that is in step with the Duty; and
• monitoring a broader range of outcomes about effective customer support.

However, the main area over which the FCA expressed concern, and called for most improvement, was firms’ monitoring of the outcomes of vulnerable customers and the use of data to do so. Below are key areas requiring improvement.

Lack of clarity and understanding surrounding what good outcomes look like

Firms in the review “could not always show a clear understanding of the needs and characteristics of customers within their target market and a clear vision for what good looks like for customers with different or additional needs”, according to the FCA. The regulator noted that firms who clearly set out what a good outcome for a particular product or service looked like were able to monitor outcomes more effectively.

Insufficient use of data to effectively evaluate and compare consumer outcomes- especially those experienced by consumers in vulnerable circumstances

The report noted that “firms were unable to effectively monitor outcomes for customers in vulnerable circumstances”. This is an ongoing concern for regulator, who indicated that this is a wider, reoccurring issue, as the findings echo those from its work on Consumer Duty Board Reports and its multi-firm review of life insurers’ bereavement claims processes.  

According to the report, many firms “have underestimated the depth of monitoring required, or choose only to monitor readily available data”. This was apparent in firms’ use of data, such as whether staff have handled customer calls in line with the firm’s processes, which does not directly measure customer outcomes, and therefore does not allow firms to effectively evaluate outcomes and determine where action is required.

Specifically, the regulator noted that the lack of “breadth and granularity” in the data many firms use has hampered their ability to effectively compare, and draw conclusions from, outcomes experienced by different consumer groups.  

For instance, in its firm survey, the FCA noted that respondents reported frequently using MI on complaints data (79% of firms), staff feedback (78% of firms) and quality assurance findings (64% of firms), whereas far fewer respondent firms used:

• Customer feedback directly from customers in vulnerable circumstances (49% of firms).
• Behavioural insights data (36% of firms).
• Referral and take up rates of additional support (29% of firms).

The report suggests using wider data sources may enhance firms’ understanding of the experiences of customers in vulnerable circumstances, including how they use products and potential harms they may be exposed to.  

Many firms were also found to have gaps in the data from distributors and third parties, limiting firms’ understanding of customer outcomes across distribution chains.

Unclear and inconsistent approach to taking action in response to particular groups experiencing poor outcomes

According to the report, firms could not always demonstrate they used data to identify areas for improvement, and many had not established clear and effective escalation processes for when poor outcomes were identified. In fact, due to “unclear policies, processes and thresholds for taking action in response to ongoing monitoring of outcomes”, the regulator noted it was unclear when, or how, escalation would occur in response to poor outcomes.

Meanwhile, whilst many firms could demonstrate they had acted to make improvements for customers in vulnerable circumstances, there was limited evidence to suggest that these actions had been assessed to determine their efficacy. Furthermore, whilst some demonstrated interventions had been made to improve individual consumer outcomes, firms had failed to sufficiently consider how improvements could be made across an entire product or service.

Lack of engagement, challenge and direction by senior leaders  

Whilst most firms in the review had established organisation-wide vulnerability policies, only 39% of firms had formal governance bodies or committees to oversee and influence outcomes for vulnerable customers. It was noted that firms with such mechanisms often had effective approaches to measuring and responding to outcomes for vulnerable consumers, and that these mechanisms tended to correlate with more exhaustive, firm-wide vulnerability strategies. 

The report emphasises the need for firms to consider the impact governance bodies and committees will have on the fair treatment and outcomes of vulnerable customers. According to the report, smaller firms should consider how they can oversee and influence outcomes for vulnerable customers within simpler business structures as an alternative to committees or multi-layered approaches, which may not be appropriate.

To read the full publication, visit: Delivering good outcomes for customers in vulnerable circumstances – good practice and areas for improvement | FCA

The highlighted examples of good practices and areas of improvement, and brief commentary for smaller firms (a welcome continuation of such commentary), are intended to help firms understand the FCA’s expectations and to continue evolving their approach.

Firms should review their existing vulnerable customer processes against the information in the FCA’s review to identify any areas for improvement and implement appropriate changes where necessary.

Further advice and support

UKGI Compliance can provide additional advice and guidance to firms looking to enhance their approach to monitoring the outcomes of customers in vulnerable circumstances, and to develop their use of data to do so. Get in touch via info@ukgigroup.com; our team are happy to help.