Over half of UK adults considered vulnerable under Consumer Duty – Watermelon

Over half of UK adults would be identified as vulnerable under the categories of the upcoming Consumer Duty regulations, new research from Watermelon has revealed. 

In a statement released earlier this week (13 June 2023), the customer experience consultancy firm said the figure stood at 56% from a survey of 3,500 UK consumers of financial products and services.

This was up from 47% in May 2022, which was highlighted in the FCA’s insights on vulnerability and financial resilience relevant to the rising cost of living survey later that year in October.

Watermelon’s study also found that the cost of living dampened the financial resilience of individuals living with pre-existing physical and mental vulnerabilities – 88% were impacted compared to 60% of customers considered non-vulnerable.

And the research showed that customers living with a physical or mental vulnerability were almost 10 times more likely to be struggling with bills and regular payments than those considered non-vulnerable.

Sian Kerr, chief strategy officer at Watermelon, said. “The FCA’s definition of vulnerable is a broad church.

”So, it is particularly worrying that there’s such a clear disparity between the vulnerable and non-vulnerable when it comes to financial wellbeing and resilience.”

Vulnerable customer

A vulnerable customer – according to the FCA’s guidance for firms on the fair treatment of vulnerable customers – is “someone who, due to their personal circumstances, is especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care”.

It added that all customers were at risk of becoming vulnerable ”and this risk is increased by characteristics of vulnerability”.

”These could be poor health, such as cognitive impairment, life events such as new caring responsibilities, low resilience to cope with financial or emotional shocks, or low capability, such as poor literacy or numeracy skills,” the FCA further noted.

Kerr added that Watermelon found that a ”significant number of vulnerable customers have ambitions of paying off debt, but without being able to put aside a little each month, or at least a plan to get to that point”.

“This is a worthy ambition that is likely to go unfulfilled,” she said.

‘Falling short’

The FCA’s Consumer Duty, which comes into force from 31 July 2023, will see financial services companies set higher standards to improve outcomes for their customers, with it setting out a slew of updated regulations that must be implemented.

However, Watermelon claimed that, for now, financial services providers were “falling short”.

Figures showed only 38% of respondents said their financial services provider was aware of their vulnerability.

And when aware, only 62% received additional support, Watermelon said.

Kerr felt that the research showed that there were ”a number of areas where financial service providers can make a huge difference”.

”By understanding customers better, and working with those at particular risk, financial service providers are best positioned to help all their customers, including the vulnerable, toward a more confident and resilient financial future,” she said.

”With Consumer Duty on the horizon, the FCA, along with these providers, will be rightly judged on whether these numbers improve.”