MorganAsh data reveals large variation in consumer vulnerability across key sectors

15 November 2023

Firms using vulnerability assessments for Consumer Duty compliance are identifying a large variation in vulnerability across the industry’s key sectors, the latest data from the MorganAsh Resilience System (MARS) has revealed.

Data from MARS is divided into ten categories – from ‘very vulnerable’ to ‘very resilient’, but for ease of reporting has been summated into three groups: ‘in difficulty’, ‘potentially vulnerable’ and ‘resilient’. UK firms using the platform have found the highest proportion of consumers ‘in difficulty’ are in the consumer credit sector, at almost half of all consumers (49%). In the mortgage sector, it makes up more than a third (38%).

Meanwhile, protection has the smallest proportion of customers ‘in difficulty’ at five percent, followed by equity release, which is nearly a quarter. Given the demographic of later life lending though, equity release has a higher proportion of ‘potentially vulnerable’ customers (43%). The highest proportion is found in the high-net worth sector, with almost half of consumers (49%), followed by protection (44%).

MorganAsh believes the high levels of vulnerability for credit companies is due to increasing financial vulnerability, while the low levels reported by specialist protection advisers is almost certainly due to pre-selection prior to clients being assessed.

Across all sectors, the mean results reveal that 19 per cent of consumers are classified as ‘in difficulty’, – where it is most likely that some action or adaptation is required. Nearly half (45%) of consumers are ‘potentially vulnerable’, meaning they are still classified as vulnerable, but the severity is not as great and – as a generalisation – an intervention or change of process is less likely to be needed. In the mean results, just over a third (36%) were found to be ‘resilient’.

It comes as MorganAsh recently revealed that MARS users were reporting a similar proportion of vulnerable consumers as the FCA’s own Financial Lives survey. Released in 2017, the survey found that around 50 per cent of consumers in the UK have some sort of vulnerability.

This high-level reporting enables managers and boards to quickly understand their customers and the quantities and types of vulnerabilities they need to manage. Firms using a yes/no approach to vulnerability will have the challenge of understanding how that the 50 per cent of vulnerable consumers is broken down when correlated to outcomes and harms.

Andrew Gething, managing director of MorganAsh, said: “It is still early days from the introduction of Consumer Duty, but some firms are starting to provide good data on the vulnerability of their customers. We should emphasise that our data is representative of the firms we are working with, so should not be taken as gospel. While every consumer is unique and each firm will have a different set of consumers, there is real value in benchmarking ourselves across different sectors.

“Worryingly, there is still a huge disparity in views on the proportions of vulnerable consumers at any one time. Some firms are still stating that they don’t have any vulnerable customers, even though we are all vulnerable at some point in our lives. The recent Dear CEO letter, issued by the FCA, highlighted the prevalence of this view among wealth management and stockbroking firms in particular.

“Hopefully publishing the mean figures will help firms to judge their own figures against these industry norms.”

MorganAsh launched its award-winning MARS platform in March last year to help firms understand and monitor vulnerable customers and deliver good outcomes – as required by Consumer Duty. It is in use across financial services and the utilities sector, enabling businesses to adopt a consistent approach to identifying vulnerable characteristics and generate an objective Resilience Rating – much like a credit score.

To find out more or access a free trial, visit: morganash.com/mars or phone: 0330 159 8162.