More than 11 million people in the UK are unaware they fall into a category officially classed as financially vulnerable, according to new research from Smart Money People, the customer review site for financial products and services.

The study found that two in five vulnerable adults — around 40% of the estimated 26 million individuals identified as vulnerable by the Financial Conduct Authority (FCA) — do not realise they meet the criteria.

The FCA’s definition includes individuals affected by bereavement, ill health, poor mental health, addiction, significant work-related stress or other major life events such as the birth of a child or divorce.

A further concern is that most people in this position choose not to disclose their situation. Nearly seven in 10 (68%) said they had not informed any financial provider. The most common reason, cited by 18%, was the belief that it would make no difference to how they were treated.

Concerns around privacy (15%) and the stigma or embarrassment associated with disclosure (12%) were also significant barriers.

CALL FOR REVIEW

Smart Money People is now calling for a comprehensive industry-wide review of how financial services providers encourage open and supportive dialogue with their customers, particularly those facing difficult personal circumstances.

Under the FCA’s Consumer Duty regulations, which came into force in July 2023, financial institutions are obliged to ensure good outcomes for all customers. Yet the report’s findings suggest that many consumers remain unaware of the potential benefits of disclosure, or uncertain whether their circumstances meet the FCA’s definition of vulnerability.

Jacqueline Dewey, chief executive of Smart Money People, said: “Our research shows that vulnerability is far more widespread than many in the industry realise, and often goes unrecognised by customers themselves, meaning vital support is missed.

“Understanding and addressing the needs of vulnerable consumers not only improves outcomes for them but strengthens the industry as a whole. It’s important for providers to implement new or showcase existing support systems that are available to customers.

“Consumer Duty exists to ensure customers feel supported by their providers so they can protect their finances and make the best decisions possible.”

SUSCEPTIBLE TO SCAMS

According to the research, individuals in vulnerable situations are 47% more likely to fall victim to scams than those who are not. Those suffering from addiction and new parents were among the most frequently targeted. Almost a quarter (24%) of vulnerable respondents said their condition made them more susceptible to fraud, while 8% reported being targeted during emotionally difficult periods that impaired their ability to make sound financial decisions.

Although some customers who disclosed their status reported negative outcomes — with 13% saying they experienced worse treatment and a quarter of those claiming they were ignored — the majority saw clear improvements. More than half (52%) said they were treated more positively after disclosure, citing better customer service, increased communication and greater protection from scams as key benefits.

However, there remains a pronounced reluctance to speak openly. Older people, in particular, are more likely to remain silent: 80% of those aged 55 and over said they had not shared their circumstances with any financial provider. Among those dealing with relationship breakdown or divorce, nearly a third (30%) expressed concern about stigma or embarrassment.

Banks were the most likely institutions to be informed of a customer’s vulnerability, with 58% of disclosures made to them, followed by credit card companies (31%). At the other end of the spectrum, car finance providers (10%) and Buy Now Pay Later platforms (3%) were seldom informed, despite offering products that could significantly impact vulnerable individuals’ finances.

Kate Pender, chief executive at Fair4All Finance, a not-for-profit organisation focused on boosting financial inclusion, said: “The financial services sector still has a way to go in how it helps and supports vulnerable customers, ensuring that they have the confidence to be transparent about their situation and access the support that they need.

“Opening up about your position to a financial services provider can be the difference between getting the right support and ending up struggling.

“ We encourage financial services providers who want to do more for their customers in vulnerable circumstances to consider how Fair4All Finance’s tools and resources may help.”

Smart Money People, which analyses over 2.5 million customer reviews, says its insights help providers identify gaps in support and strengthen compliance with regulatory expectations, ultimately building greater trust between institutions and the customers they serve.