Mind the knowledge gap: the FCA issues its guidance on handling vulnerability

Following the release of the Financial Conduct Authority’s (FCA) FG21/1 Guidance for firms on the fair treatment of vulnerable customers last month, the regulator has, once again, reiterated the need for action, change, and continual progress in driving improvements throughout all firms operating within the sector when dealing with vulnerable customers.

The regulator asserts that this is not a ‘one-off supervisory exercise’[1] and that it will be integrated into their supervision. Emphasising that ‘firms need to ensure they are able to demonstrate how their culture and processes result in the fair treatment of all customers, including those who are vulnerable’[2].

They also highlight the importance for firms to ‘carry out proactive data analysis to identify where vulnerable customers are more likely to suffer harm when things have gone wrong or where there are patches of poor staff knowledge and performance’[3].

The FCA recognises that employee knowledge plays a primary role in the positive or negative resolution for vulnerable consumers, and they are issuing a call-to-action for firms to take note: are you heeding the call?

It is resoundingly clear from the guidance that the FCA is actively encouraging firms to support the emotional and in-role capability of their staff on a continuing basis to ensure the fair treatment of all customer, vulnerable or not.

This is certainly welcomed and required. Consumers demonstrating characteristics of vulnerability has risen exponentially due to Covid-19. The FCA’s Financial Lives 2020 survey: the impact of coronavirus highlights that “[B]etween March and October 2020, the number of adults with characteristics of vulnerability increased by 3.7 million to 27.7 million.”[4]

The regulator underlines that all staff (frontline, back-office, product and service development) will require more effective support in terms of Training and Competence programs to deliver the positive outcomes necessary for every employee – within their induvial roles – to successfully adhere to policies, processes, and governance at all times when dealing with vulnerable consumers.

The scope to get vulnerability handling wrong is extensive, as are the subsequent opportunities to cause consumer harm.

The fact is that most routes to potentially cause consumer harm lead back to how capable or incapable every member of your workforce is.

The call from the FCA for firms to proactively identify knowledge gaps or poor performance illustrates that there is a major concern that lack of competency and conduct (in relation to adherence to policy, processes, and governance), combined with and a deficiency of continual stress-testing of vulnerability checks, could actively lead to staff and firms causing unnecessary harm to vulnerable consumers and the market in general.

The need for exacting, consistent and evidence-based Training & Competence programs is required, with a strict mantra: train, retain, fix, and follow. If your firm has not made any changes to your governance or processes, and you cannot evidence or monitor that your employees are successfully applying what you need them to, then you are at risk – it is now that simple.

In our recent webinar: Employees First, Customers Second: Turning your approach to Training and Competency upside down in 2021 [February 2021], we conducted some live polls which indicated that 40% of regulated firms had not changed their approach to Training & Competence (T&C) over the last year and that 66% of firms were ‘not confident at all’, ‘slightly confident’ or only ‘somewhat confident’ that their Senior Managers could demonstrate a consistent approach and application to T&C.

How vulnerable is your firm when it comes down to employee knowledge?

Elephants Don’t Forget work with global financial organisations including Aviva, Allianz, Accenture, Experian, and BNP Paribas to improve the capability of their workforce – and we can support you.

Inadequate employee training leaves your firm open to increased risk and brand damage. The requirements for firms, both in terms of staff capability and monitoring the effectiveness of actions taken, are clearly defined by the regulator:

• Ensure your staff (frontline, back-office, product design) are supported and trained appropriately on vulnerability handling and can positively apply existing policy and process knowledge in their day-to-day dealing with consumers.
• Make regular assessments of your Training & Competency a priority and repair root causes of knowledge gaps that can potentially cause harm.
• As consumer needs change, so should your Management Information (MI). You need to be able to get hold of data to test, analyse, and repair the competency gaps of your workforce consistently to deliver positive consumer resolutions and experiences.

Ultimately, as the FCA note:

‘Firms should take action where they see poor outcomes for vulnerable consumers to understand what is driving those outcomes. They should ensure learning is effectively fed back into product and service design to ensure that improvements can be made’.[5]

This is what Elephants Don’t Forget can support you with. We empower global financial organisations to test, repair, improve, and evidence employee knowledge daily. All in the space of just 90 seconds per day and with financially guaranteed performance outcomes.

Sources:
[1] FG21/1 Guidance for firms on the fair treatment of vulnerable customers: 1.29
[2] FG21/1 Guidance for firms on the fair treatment of vulnerable customers: 5.4
[3] FG21/1 Guidance for firms on the fair treatment of vulnerable customers: 5.7
[4] FCA: Financial Lives 2020 survey: the impact of coronavirus
[5] FG21/1 Guidance for firms on the fair treatment of vulnerable customers: 5.12