The FCA is beginning to “flex its muscles” with notices issued to firms needing more data on vulnerability, MorganAsh has warned.

The regulator has started to use its Section 165 powers to issue notices to firms, requesting more data to meet the vulnerability monitoring requirements of its Consumer Duty.

Ahead of the implementation of the rules in July next year, firms have a responsibility to understand how Consumer Duty is being implemented across the value chain. Manufacturers have until April 2023 to inform intermediaries of how they are going to implement Consumer Duty requirements.

The regulatory action follows a huge variation in the proportions of consumers being identified as vulnerable.

MorganAsh suggested that a good approach for firms would be to compare the proportions and severity of vulnerable customers against the FCA Financial Lives survey, which used data based on 13,000 consumers and could provide firms with a benchmark.

According to MorganAsh managing director, Andrew Gething, the variation is most likely due to the way vulnerability is measured, rather than radically different cohorts of consumers.

“The key issue is there are still firms who are only reporting the proportion of vulnerable customers in single figures,” Gething commented. “The reality is they are just not assessing their customers or recording their vulnerability in any sort of consistent manner. It therefore comes as no surprise to see the FCA flexing its muscles and issuing notices in preparation for July.”

MorganAsh has supported firms across the financial services sector in their preparations for the Consumer Duty rules. Earlier this year, the firm launched the MorganAsh Resilience System (MARS), an online tool that provides brokers and advisers with a consistent and objective approach to manage and monitor vulnerability.

Gething added: “A simple measure is to understand the proportions of vulnerable consumers being identified. Using the MARS tool, customers are reporting the proportion of vulnerable customers around the 50% mark, in line with the FCA’s Financial Lives Survey. Although there is variation by age and between each firm.

“We are seeing results slightly higher than the FCA Financial Lives Survey, but this is probably due to the cohorts of customers we are starting with, where there are proportionally more vulnerable.

“Nonetheless, the data shows the clear disparity in vulnerability assessments. It should all serve as a reminder to firms that a consistent approach to vulnerability assessments is necessary to produce the required data for both the regulator and for Consumer Duty.”

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