Vulnerable client policies have been a requirement for FCA regulated firms for a while now and the regulator has made it a key theme in recent years. They are keen to ensure that vulnerability is understood by the industry so the clients that are vulnerable for any reason will have their best interests served by their advisers.
The SRA have also brought the issue back into the spotlight in 2022 with new guidance to assist practitioners when taking instructions from vulnerable clients, or their representatives, particularly focusing on capacity.
- Vulnerable clients may not realise that they are vulnerable, or potentially vulnerable – indeed, we are probably all vulnerable at various points in our lives.
- How do you recognise vulnerability?
- What do you do when you come across a client that you consider could be vulnerable?
How can you ensure that the client is provided with your services which are accessible to their needs and ensure that they can make informed decisions?
When developing a vulnerable client policy, an excellent free training resource for firms is available, written by the Society of Later Life Advisers (SOLLA), which would be useful for all that have contact with clients from receptionists to fee earners.
Being able to recognise situations where a client may be vulnerable is a key starting point for firms to then build on how their systems and processes can be developed to improve client experiences and ensure that they can meet the duty of care to act in clients’ best interests and with integrity. Both of these principles appear in the FCA handbook and SRA Standards and Regulations.
Professionals working together for a vulnerable client, typically where the client no longer has capacity to manage their finances, should provide the client with additional protection against fraud/scams. Although fraudsters are very sophisticated these days, the systems and controls embedded into professional practices should mean any potential fraudulent activity can be discovered more quickly.
A recent case study highlights this, in respect of an elderly individual living with dementia, but still living at home independently with some support throughout the day. Their professional Attorney, a solicitor specialising in vulnerable client work, took over the management of their financial affairs at their request as it became too much to deal with. They instructed him to work with their financial adviser, who had acted for her for many years. This provided peace of mind that both of their trusted advisers were working in their best interests at a time where they were particularly vulnerable.
The client was unfortunately targeted by criminals and unwittingly divulged details of their bank account and the result was that withdrawals started to be made consistently over a period of weeks.
The financial adviser had arranged for a small balance to be in the current account at any time, which was topped up from a feeder account when the balance reached a certain level.
Due to the processes in place at the Attorneys’ firm, whereby any accounts managed by professional attorneys are reconciled on a monthly basis, they were able to pick up the unusual activity on the account. Between both the solicitor and the financial adviser, they were able to act quickly and provide the necessary evidence to the bank who dealt with the fraud quickly and informed the authorities accordingly. The result may have been very different had the professionals not been appointed, with a slow drip feed of withdrawals potentially having a huge impact on the client’s financial situation over a longer period of time and maybe never being noticed.
It is frightening to see the extent and frequency of these kinds of stories in the news. However, it does demonstrate that having clear, robust internal policies will help firms to undertake their duty of care and ultimately benefit clients, so should be considered carefully.
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