I am not going to get all Brené Brown on you in the middle of your studies (although I would recommend that you check out her work if you haven’t already, it’s excellent).
However, a topic that the FCA have become more and more focused on over the past number of years is that of Vulnerable Clients.
One of the problems with a vulnerable client is that they, never mind you, might not even know that they fall into this category. (In the FCA 2017 Financial lives Survey, published in 2018 it was found that 50% of UK adults display one or more of the characteristics of being vulnerable).
That is a lot of people.
AF7 Exam syllabus
I won’t go into the detail of what can make someone a ‘vulnerable client’ as it is easily available (CII 2020/21 study text chapter 4/48, being just one of the locations).
What is important though is why it features in the AF7 text.
As we know, for the vast majority of clients the decision to transfer their Defined Benefit pension could well be the single largest financial decision that your client will make – in many cases dwarfing that of even their own home purchase.
If a client has just gone through a life event that would put them into the ‘vulnerable client’ category, then there is a much higher chance that they could be reckless in their financial decision making.
Maybe ‘reckless’ is the wrong word here. But if your life partner, your best friend in the world has recently died do you really care about the risk of leaving a defined benefit scheme? Or do you just want the mortgage cleared and be damned with the consequences?
This, of course is an extreme example and there are many, many much more subtle cases than the above. But the consequences are just as severe.
In 5 years, when the emotion has subsided will they still be happy with the choice that they made over their pension transfer? That is the question that we need to be asking ourselves.
Do keep in mind the steps that you can take to help your clients if you feel that they may fall into the vulnerable category;
- Allow extra time for client meetings
- Advise that your clients bring along a trusted friend to the meetings
- Allowing them more time to fully process the weight of the decision that they are about to make
- If the meeting is online, you can give them access to the recording so that they can review it on their own time
The above are small steps that could make a big difference to your potentially vulnerable clients. Which ultimately leads to better outcomes for those who need it most.
And that is, after all why we are working towards these difficult exams… to be able to help those who need the most help.
Study Resources for AF7
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