The vulnerability spectrum

The Financial Conduct Authority (FCA) Guidance Consultation GC19/3 introduced the categories of ‘actually vulnerable’ and ‘potentially vulnerable’ customers. 

Following feedback during the subsequent consultation, the FCA altered their approach and, in Finalised Guidance Consultation FG21/1, described vulnerability as a spectrum of risk.

Drivers of vulnerabilty risk

The FCA has identified four key drivers which can lead to increased risk of customer vulnerability: 

  • Health - conditions or illnesses affecting a customer’s ability to carry out day-to-day tasks

  • Life events - such as bereavement, job loss or relationship breakdown

  • Resilience - low ability to withstand emotional or financial shocks

  • Capability - low knowledge of financial matters or low confidence in managing money (financial capability). Or low capability in other relevant areas such as literacy or digital skills.

These drivers can impact people of all ages and wealth.

Spectrum of low risk to high risk

All customers have a risk of becoming vulnerable (from low to high) so fall within a spectrum of risk:

  • Customers at one extreme are less likely to be vulnerable and therefore face a lower risk of harm.

  • At the other extreme, the risk of harm is greater and customers are more likely to have different needs, for example multiple overlapping characteristics of vulnerability.

Clients along the spectrum will have diverse needs and experience different things at different points in their life. It’s important to identify the needs of all customers along this spectrum and respond accordingly. For example, a customer who’s lost their job or falls ill is likely to have different or more needs than others. If these aren’t met, they may be vulnerable to harm.

If they also have low resilience or capability, they’re likely to need more support and can be at greater risk of harm if they don’t receive it.

Customers at the greatest risk of harm are likely to require more, or different, support than others. They may also need prompt help to prevent risk of harm growing, for example protection from financial scams. 

See our ‘Client Wellbeing Checklist’ for a template that makes it easier to assess and record a client’s vulnerability.