Advisers urged to review vulnerable client practices post-COVID

by Ksenia Stepanova28 Jul 2020

Strategi Group has urged financial advisers to ensure they have “adequate policies, processes and practices” in place to assist vulnerable clients, as the COVID-19 pandemic has had a severe impact on financial health across the globe.

Executive director David Greenslade says that for advisers, it is more important than ever to ensure they are well placed to deal with vulnerable client needs, noting that the FMA has released a information sheet in June where it urged advisory firms to conduct a review of customer vulnerability practices.

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In its recently released white-paper, Strategi explained that vulnerability has many faces - one in four New Zealand adults have literacy difficulties, while one in six are diagnosed with a common mental health disorder. In a 2018 report, it was revealed that 68% of people reported money worries while 47% were concerned around job security - figures which have likely risen significantly over the past months.

With unemployment set to rise and vulnerability likely to rise with it, Strategi says advisers need to take a “holistic approach” to delivering good results.

“Vulnerable clients need to be considered throughout the whole client journey, and in all interaction,” Strategi states. “This includes from how you design products, through to how advice is delivered.”

“One of the essential features of delivering good outcomes for vulnerable clients is ensuring staff are well trained to identify these clients in the first place,” the report continues.

“Well trained staff are often able to help vulnerable clients articulate their needs, by asking about their requirements at key stages during the client journey. This might include letting the client know they need to understand a little more about their circumstances when they are considering switching products.”

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Strategi suggests using the ‘4 Rs’ framework to ensure good practice - recognise potentially vulnerable clients, record your interactions, respond with appropriate action and have good reporting mechanisms in place to evaluate your client’s experience.

“It is important to remember the regulatory framework firmly places the onus on you, as the financial advice provider, to meet client needs and deliver good outcomes for vulnerable clients,” Strategi says.

“Due to the COVID-19 crisis…it is becoming more likely that vulnerable clients will form part of your client base. By ensuring you have well-trained staff who are able to identify and understand these clients’ needs and that can use that knowledge to adapt services appropriately, will help to ensure the needs of all your clients and your obligations, are met successfully.”

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