Editor’s Comment: Vulnerable clients need a hero

A new study of advisers and consumers has found growing concerns about the financial decision making of vulnerable clients, and some evidence numbers are increasing.

The study, carried out by actuarial consultants AKG and sponsored by Standard Life, found that one in 10 adults say their relatives have made poor financial decisions in the past two years resulting in some form of financial loss.

Nearly a quarter of consumers (23%) said they believed relatives had made poor financial decisions overall in the last two years and 45% of UK adults were concerned about the financial decision-making of their more vulnerable relatives as they get older.

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Among those with relatives who have made poor financial decisions, 37% attributed this to a lack of knowledge or understanding, while 31% said their relative lacked access to good advice or guidance.

Financial advisers backed up the findings with as many as 35% saying their clients could be classed as vulnerable.

I have no doubt that many clients have shown, and increasingly show, signs of vulnerability, especially as they get older. For a Financial Planner I can imagine that advising someone in their mid-50s about their retirement planning is quite a different matter to advising someone in their late 80s about their pension pot and legacy issues. It has been good to see many planners take this on board.

However, like many, I had assumed that the issue was relatively small and also that regulators, professional bodies and others had done much good work in this area to alert people to the issues and therefore it was only a small issue.

It looks, however, like the issues are bigger and more pressing than I realised. With an ageing population more are falling into the ‘vulnerable client’ category but many have no planner to rely on. They are becoming easy meat for scammers and the like and it’s no surprise criminals target these groups which can be easily manipulated and may be more trusting than others.

Even with this in mind, one in 10 facing loss due to their vulnerability is an appalling statistic and it’s clear more needs to be done.

The regulator can do more here to ensure that vulnerable clients are better protected. Introducing new regulations which require all vulnerable clients to go through a ‘vulnerable client’ pathway before making any financial decisions may well be one route to follow. A guided pathway which keeps them away from crooks would help immensely.

AKG and Standard Life deserve a pat on the back for raising this important issue but it’s now time to hand the challenge back to the regulator and the profession. Without some new practices and better protection vulnerable clients may well become the next mis-selling scandal. Financial providers also have a key role to play here in protecting clients from bad decisions.

It will be impossible to ever make vulnerable clients completely invulnerable to poor advice and scams but that does not mean nothing can be done to build robust and meaningful defences. 

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days. Follow @FPT_Kevin 

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