Financial Vulnerability

A vulnerable consumer is someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.

Financial Conduct Authority (FCA) definition of a vulnerable customer, 2015

In their 2017 paper, Financial Lives, the FCA noted that 50% of adults were considered to be financially vulnerable and 4.1 million people were defined as being in difficulty, because they have already failed to pay domestic bills or meet credit commitments in three or more of the last six months.

In the 2017 paper, ‘Vulnerability: a guide for lending’ (of which our founder Tim Farmer was a co-author) three stages of vulnerability were identified – Potentially Vulnerable, Vulnerable and Highly Vulnerable. It was also recognised that individuals can flow between the stages and their vulnerability may be permanent, sporadic or temporary.

Furthermore, it is understood that vulnerability can be caused by different factors that can be classed as individual, environmental and institutional and can be broadly separated into four areas;

  • health – health conditions or illnesses that affect the ability to carry out day to day tasks
  • life events – such as bereavement or relationship breakdown
  • resilience – low ability to withstand financial or emotional shocks
  • capability – low knowledge of financial matters or low confidence in managing money

Although Vulnerability and Mental Capacity are not the same, there is often a cross-over and as early as 2015 we at TSF Consultants recognised that our expertise in Mental Capacity provides an extra level of insight when it comes to identifying financial vulnerability and its causation.

Since then, we have been working closely with institutions and individuals to support them to identify financial vulnerability through education and assessment.

See more information about our Financial Vulnerability Assessment, or contact us for more details.