Firms must act swiftly to digitise their approach to customer vulnerability if they are to meet new requirements on targeted support and remain compliant with the Financial Conduct Authority’s Consumer Duty, according to MorganAsh.
The warning follows the publication of the FCA’s consultation paper CP25/17, which sets out proposals to create a new middle ground between generic guidance and full financial advice.
The targeted support model is intended to improve access to help for consumers who do not receive regulated advice, especially those at risk of harm due to vulnerability.
MorganAsh, which provides support services for assessing vulnerability, says firms will not be able to meet the regulator’s expectations without a thorough understanding of consumers’ individual characteristics and personal circumstances.
The paper highlights the importance of designing customer segments with common characteristics while taking vulnerable customers explicitly into account.
Andrew Gething, managing director of MorganAsh, said: “With full financial advice still inaccessible to many, targeted support presents a genuine opportunity to transform the advice landscape.
“To be clear though, firms must be able to understand customers’ characteristics and circumstances to provide targeted support – and to know when it is appropriate to do so. Customer vulnerability is absolutely no exception to this and is integral to wider compliance with Consumer Duty.”
The FCA’s proposal is partly a response to the continued gap in advice provision. Recent figures show that just 9% of UK adults received advice on pensions or investments over the past year. The regulator hopes that the new framework will support the government’s broader growth agenda by improving consumer confidence and financial wellbeing through more affordable and scalable advice options.
Gething warned that without digitised systems to identify and track customer vulnerability, firms will struggle to implement targeted support effectively or affordably. “The data gathered from digital vulnerability management can profile consumers of similar segments to meet the targeted support criteria,” he said.
“If the segments are created too simplistically, without the personal profile data, then firms risk falling foul of vulnerability criteria – and could see targeted support pulled before it really gets going.”
He added that while the sector may still have questions about the implementation of targeted support, there is broad consensus that the current advice gap is unsustainable.
“To increase access, targeted support must be cheaper and more scalable than traditional advice. However, we must deliver good outcomes – particularly for vulnerable customers. This requires firms to embrace and prioritise digitisation,” he said.
According to MorganAsh, the technology to deliver a compliant and efficient approach to vulnerability already exists. The challenge, it says, is ensuring firms adopt these tools quickly and systematically, not only to manage costs and resources but also to ensure they can meet their Consumer Duty obligations.
Gething concluded: “Targeted support will hopefully close that gap, but to do so, firms must have a digital, data-driven approach to ensure they are offering the right support to the right people.”
