With Covid-19 challenging our daily living and creating an unprecedented level of financial uncertainty, now more than ever the focus is on New Zealanders’ financial vulnerability.
Earlier this year, the Financial Markets Authority provided guidelines for financial providers on how to identify and deal with customers’ vulnerability – best-practice principles that also apply to financial advisers.
Here’s how timely, quality communication can play an important role in supporting your clients through these challenging times.
Understanding the meaning of ‘financial vulnerability’
According to the FMA’s information sheet ‘Customer vulnerability – our expectations for providers’, “a vulnerable consumer is one who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”
In other words, vulnerability can arise at any point in the customer journey, stemming from a variety of personal circumstances or specific events, including:
- Redundancy or sudden financial hardship
- Serious or chronic health issues
- Age-related issues
- Physical or mental disabilities
- Traumatic events like bereavement or natural disasters
- Communication difficulties.
Covid-19 has exposed New Zealanders’ financial vulnerability with unprecedented clarity. As the Commission for Financial Capability (CFFC) found during Alert Level 4 in early 2020, 34 per cent of households surveyed were in difficulty and 40 per cent were at risk of tipping into hardship.
But recent events have also showed that quality financial advice can provide New Zealanders with the confidence they need to make well-informed decisions and face the challenges ahead. In October 2020, an independent survey commissioned by Financial Advice NZ revealed that Kiwis who have a financial adviser in their corner feel significantly better prepared for their future than their unadvised peers.