During a webinar on Wednesday (6 December), Kate Tuckley, head of consumer investment at the FCA, said the regulator was "relatively disappointed" in the way some investment firms have been approaching vulnerability and information sharing.
She said the FCA had seen evidence that some companies view vulnerability as a "low priority", whereas other have not considered it at all, resulting in the lack of support to vulnerable consumers.
"In our recent Wealth Data survey, we highlighted that 49% of portfolio managers and 69% of stockbrokers identified no vulnerable customers," she said.
"Yet 50% of us will be classed as vulnerable consumers at some point over our lifetime. We are therefore exceptionally concerned that firms are just not thinking widely enough on this topic."
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She noted some firms have been taking a "very narrow" approach, equating wealth to a lack of vulnerability, when that is often not the case.
Looking at areas of poor practice, Tuckley provided examples of businesses automatically assessing consumers as vulnerable if over a certain age. Such a blanket approach "does not really get to the heart of assessing vulnerability", she said, emphasising the need for a "more nuanced approach".
However, she did acknowledge that consumers over a certain age may demonstrate and exhibit characteristics of vulnerability.
Tuckley continued: "We have also seen some evidence that firms ask their consumers to self-identify vulnerability and then provide the evidence to back that up. We do not think that is good enough.
"And we have also seen some firms which ask their consumers to identify as vulnerable, but then suggest that might be a barrier to access those services, which again is not great practice."
In a recent investigation, Investment Week highlighted the issues asset managers have been facing when it came to implementing vulnerability, including within product design.
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Tuckley also highlighted some good practices in this area, including firms proactively spotting and monitoring their businesses' trading activities to identify any potential "gambling-like activity" and then reaching out to those consumers to see if they can be supported better.
She added: "We have also seen some firms that are turning off the productivity metrics for their staff when they identify that someone is vulnerable; and we have seen some really creative ways for those that are elderly and are trying to navigate customer identification to make sure that they are not vulnerable or subject to frauds and scams."
The other area the FCA noted consumer investment firms are falling short on was information sharing.
Tuckley acknowledged several firms have concerns and face challenges around the distribution of information, especially following the introduction of Consumer Duty, but said the regulator had concerns about the way such information has been shared "both up and down that distribution chain".
She said the FCA has seen some firms provide information that "does not enable other participants to actually assess value, or where a firm has identified that a product may not provide good value, they are not giving enough reasons or not explaining what they are doing about it".
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"We have seen some firms not sharing enough product information at all and others that are sharing too much - extreme examples where they are sharing line by line customer data," she said.
"Effective sharing of information and data is critical for good product governance - for example, to help manufacturers develop better products for their target markets, but also for distributors to make sure that they are identifying the right consumers to whom they should actually promote their products.
"Overall, we expect information sharing to be proportionate, and we certainly do not want to see the Consumer Duty leading to the development of a 'cottage industry', where information sharing may ultimately then end up being a cost to the end consumer."