The Financial Conduct Authority (FCA) is beginning to “flex its muscles” with notices issued to firms needing more data on vulnerability, MorganAsh managing director Andrew Gething 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 Consumer Duty.

Ahead of implementation 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 and understanding and communicating vulnerability is part of this.

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

He argues this 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. The reality is they are just not assessing their customers or recording their vulnerability in any sort of consistent manner. Therefore, it is no surprise to see the FCA flexing its muscles and issuing notices in preparation for July.”

Gething suggests that a good approach for firms is to compare the proportions and severity of vulnerable customers against the FCA Financial Lives survey.

While each firm will be different, he says the data is based on 13,000 consumers and “provides both a clear benchmark and a good place to start”.

He adds: “A simple measure is to understand the proportions of vulnerable consumers being identified. Using the MorganAsh 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.”