The challenging winter ahead: how can firms help protect vulnerable customers as inflation worsens?

cost of living crisis winter powerlines and costs

As we look back at a tumultuous summer for the UK economy, many consumers would be forgiven for considering it one to remember for all the wrong reasons. With the escalating Ukraine conflict, lingering Brexit uncertainty and the after-effects of pandemic lockdowns all taking their toll on fuel and food prices, British consumers have had to contend with compounding hits on their cost of living from all sides for several months now.

And as we come into winter, we face further uncertainty.

A recent BBC report revealed that food price inflation jumped further from 9.3% in August to 10.6% in September – with prices now spiralling at their fastest rate in almost 40 years. The UK Government’s recent mini budget caused the value of the pound to reach all-time lows, and the Bank of England has warned that inflation could hit 13% before year-end. And meanwhile, concerns about the affordability of mortgage deals amid alarming price rises caused major high street banks to pause all lending – with 40% of all deals being pulled from the market entirely.

So there’s no surprise that everyday consumers, particularly those already at risk of financial difficulties, will be subject to mounting financial pressure for the foreseeable future.

That’s why financial services firms are expected to come under unprecedented pressure over the coming months to serve even more distressed customers. And it’s therefore crucial that firms do all they can to detect emerging or intensifying signs of vulnerability among their customers – and take a proactive approach to provide compassionate support to those in need.

Why is vulnerability easily missed?

The FCA’s guidance defines a vulnerable customer as ‘someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.’

An important point to note is that vulnerability is an evolving characteristic: one that’s often more helpful to think of as a continuum than a binary ‘yes or no’ categorisation. Consequently, advisers should keep in mind that individuals who weren’t previously considered vulnerable can quickly become so due to adverse life events, e.g. job losses, health impairments or bereavement.

In fact, the FCA’s Financial Lives Survey 2020 noted that over half (53%) of UK adults now display some degree of vulnerability. And that was before the incessant spikes in energy and consumer goods prices began, suggesting that figure is likely to be much higher than it was two years ago.

Serving vulnerable customers

With the economic situation worsening by the week, firms should be asking themselves a simple, honest question: ‘are we truly equipped to manage the increase in vulnerable consumers?’

The reality is that businesses simply can’t wait any longer and equip themselves with the tools and knowledge they need to handle the incoming influx of struggling customers looking for help.

So where to begin? Firstly, you should make doubly sure your staff are robustly trained in compliance, conduct and best practice when dealing with customers. Refresher sessions on spotting warning signs of vulnerability, for example, will help them prioritise the most salient factors when giving advice to at-risk individuals. And it’s extra important to maintain a patient, dignified and compassionate manner when dealing with those struggling.

Technology to manage fair customer treatment

With the steep increase in consumer vulnerability and the regulator’s focus on fair treatment, it’s time to explore how AI-enhanced compliance analytics tools can help your quality assurance team direct their attention where it’s needed most. Systems such as Recordsure Voice provide your staff with 100% oversight of all client conversations and help to increase supervision and processes monitoring. You can quickly review how vulnerable customers are treated and counter emerging risks on a broader level as they arise.

Of course, firms should already be looking to strengthen their oversight and operational efficiencies as part of their new Consumer Duty commitments – but if the past year has shown us one thing, it’s that businesses can’t afford to treat consumer safeguards as a box-ticking exercise to please the regulator.

Indeed, recent events have served as a sobering reminder of how quickly individuals’ circumstances can change, often due to factors outside their control. And so now’s the time for firms to step up and fulfil their duty to consumers by providing the best possible service – ensuring their financial difficulties don’t cause any more stress than they need to.

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