Financial services firms should take a more proactive approach to identifying customers who may be struggling with money worries, MorganAsh has said.
Research from the Building Societies Association, published ahead of UK Savings Week, found that financial stress had negatively affected the work performance of 22% of UK workers.
A further 19% had taken time off because of illness caused by financial concerns. The study also found that 27% of UK adults had less than £1,000 in savings, while 21% could not cover an unexpected expense of £300.
MorganAsh said the findings should encourage firms to consider whether they could recognise financial difficulties among customers who had not disclosed their circumstances.
Andrew Gething, managing director of MorganAsh, said: “The BSA’s findings show just how far the consequences of financial difficulty can extend beyond the pounds and pence.
“It can have a detrimental impact on a person’s health, their confidence, their ability to work and ultimately, their ability to engage with financial services firms and make important decisions.
“The big question for these firms is: would they actually know if one of their customers was struggling?”
Gething said financial difficulty could indicate that a customer’s resilience was under pressure, even when the individual continued to meet their main commitments.
He said: “Financial difficulty can be an important indicator that a customer’s resilience is under pressure, but it may not be something that a customer is willing to disclose.
“Furthermore, customers may not consider themselves to be vulnerable – particularly if they are managing to cover their main commitments.
“Without that deeper understanding of the client’s wider circumstances, a firm may not see any otherwise obvious signs of difficulty.”
He said firms should use appropriate systems, processes and data to identify changes in customers’ circumstances rather than relying solely on disclosure or observations by front-line staff.
Gething said: “This is why firms need to take a genuinely proactive approach to identifying customer vulnerability, supported by the right systems, processes and data.
“Rather than waiting for customers to share difficulties or relying on front-line staff to spot signs of financial distress, we need to proactively identify potential indicators of a customer’s change in circumstances.
“We should have clear processes in place to modify products and services where necessary and to provide appropriate support.”
The Financial Conduct Authority has recently highlighted the need for firms to use both proactive and reactive measures to identify customer vulnerability. MorganAsh has called for the two approaches to form part of a digitally led vulnerability management strategy.
Gething added: “Consumer Duty has reinforced the importance of firms understanding their customers and delivering good outcomes, and effective identification and management of customer vulnerability is a critical part of that.
“The better firms become at recognising when someone may be struggling, the earlier they can step in with the right support – potentially preventing a difficult situation developing into a far more serious one, all while building trust and loyalty among their customer base.”
MorganAsh supplies the MorganAsh Resilience System, which is used by financial services and utility companies to identify and monitor vulnerable customers. The system produces a Resilience Rating intended to provide a consistent measure of customers’ circumstances.
