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According to the City watchdog, less than half (42%) of vulnerable customers have opened up about their personal situations to companies.

Those dealing with vulnerabilities such as health issues, a limited capacity for financial emergencies, or low levels of financial and digital knowledge were more likely to report negative encounters with financial service providers. A significant 44% of vulnerable clients recounted adverse experiences, in contrast to just a third (33%) of non-vulnerable clients, research by the Financial Conduct Authority (FCA) revealed.

Among those vulnerable customers who did share their personal details, some were prompted by the firms themselves, while others felt compelled due to their circumstances. A notable 25% of individuals in precarious situations expressed discomfort in discussing their conditions with financial service providers.

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The reluctance to disclose personal information stemmed from feelings of embarrassment, fears of being treated differently, or concerns over potentially receiving an inferior deal. Some customers were unaware that their firm could offer assistance, and others believed their circumstances had no impact on their financial dealings.

Three-quarters (74%) of vulnerable customers who informed their firm about their situation reported that staff posed appropriate questions to grasp their condition, 57% sensed that their firm "cared", and a similar number (58%) acknowledged that their firm took measures to provide the necessary support.

The Financial Conduct Authority (FCA) has stepped up efforts to ensure financial service firms cater adequately to consumers facing challenging circumstances. The watchdog rolled out guidance in 2021 and went on to introduce the Consumer Duty in 2023 – a mandate compelling companies to achieve positive results for all clients, especially those in vulnerable positions.

In its latest move, the FCA has released a review along with examples of good and poor practice, aimed at guiding firms toward providing consistent and appropriate support under the Consumer Duty.

Sarah Pritchard, the FCA's executive director of competition, markets and international, commented on the importance of customer communication and support: "It can be hard to tell your bank or insurer about your specific needs but those who ask for help tend to feel more supported."

She acknowledged both the progress and shortfalls observed thus far: "We've seen good examples where financial firms are making a difference for vulnerable customers, but we know that vulnerable people report more negative experiences than others. We want firms to build on the good work identified, to help people open up and make sure they get the support they may need."

As part of its investigative approach, the regulator amassed data and insights directly from firms and consumer interactions, as well as engaging third parties to scrutinise how firms treated customers in vulnerable conditions. This process involved surveying 725 firms and conducting consumer research with 1,500 participants, supplemented by in-depth telephone interviews with 20 financial services customers.

The FCA has highlighted instances where companies have provided exceptional support to vulnerable customers. One such case involved a man suffering from severe anxiety, who found himself in a panic when his rent was increased nine months ago.

After contacting his bank and explaining his situation, they offered regular check-in calls to provide support. This approach has boosted the customer's confidence in managing his finances and trust in his bank, particularly appreciating the consistency of having the same person call each time.

In another instance, a woman now receives email summaries of phone conversations from her bank after experiencing temporary issues with her hearing aid during a call. She had explained her situation to the call handler, who implemented this supportive measure.

The FCA also shared the story of a man living with cystic fibrosis, which restricts his working hours. His trust in his bank grew after they invited him for regular in-branch meetings to discuss his financial situation.

Feeling comfortable enough to disclose his health condition, he has since started saving regularly, improving his financial stability. However, the FCA identified areas for improvement, including the need for better training on vulnerability for product and design staff. The regulator encourages firms to consider these findings as they continue to embed the Consumer Duty, which mandates companies to prioritise customers in their product design.

The regulator also pointed out the ambiguity surrounding what companies deem as good and poor outcomes. The regulator emphasised that firms should take action when they identify any group of retail customers receiving worse outcomes than another group for the same product.

The FCA noted that some firms failed to adequately support their staff in identifying customers in vulnerable situations, encourage customer disclosure, or provide prompt and appropriate care. Communication issues were also highlighted by the FCA, including the lack of tailored or accessible communications.

In one instance, an individual who had difficulty using the internet wanted to find out how much their pension payments would increase in the next financial year and called their provider a few months ahead. However, after being directed through phone menus and failing to reach someone who could assist, they gave up.

In another case, a customer with autism, mobility issues and low digital skills was sent a 12-page form by their bank to update their information. Despite contacting the firm multiple times via phone, the customer received repeated instructions on how to complete the form.

The firm then warned the customer that if the form was not completed within 30 days, their account would be restricted. This led to a family member making a three-hour round trip to accompany the wheelchair-using customer to their nearest branch.

Tom Selby, director of public policy at AJ Bell, emphasised the importance of transparency for retirees purchasing annuities: "For anyone using some or all of their retirement pot to buy an annuity from an insurance company, being honest about any health or lifestyle factors that might reduce your life expectancy is absolutely vital."

He also pointed out the financial benefits of such honesty: "Being open about a physical ailment with a firm you don't know might feel uncomfortable, but when it comes to annuities, it could result in you receiving thousands of pounds more income each year.

"It might feel a bit 'un-British' to talk about vulnerability, but the more open you can be – both socially and with the firms we interact with – the more likely you will get the help and support you need."

Peter Tutton, head of policy, research and public affairs at StepChange Debt Charity, highlighted a concerning trend among those in debt: "At StepChange, it's very common for people struggling with debt to have additional vulnerabilities, in fact over half (55%) of new clients have a vulnerable characteristic in addition to their debt problem – so it's worrying that so few vulnerable customers are disclosing their needs to their creditors.

"We know many people in vulnerable circumstances face barriers to support, such as fear and anxiety about the consequences of asking for help, not knowing what support is available and mental health problems that make it difficult to cope with their situation and take action."

Kathryn Townsend, Nationwide Building Society's head of customer vulnerability, commented on the importance of supporting customers, especially those in vulnerable situations. She said: "It's encouraging that many customers who reach out for support have positive experiences and this research emphasises why the Consumer Duty is so important; it's vital the FCA continues to raise expectations of firms to support customers in vulnerable situations."

She further highlighted the challenges faced by people in need of help: "It's understandable that people in vulnerable situations find it hard to speak about their personal circumstances to others, especially to banks and building societies. There can be a fear that they will be penalised in some way, when in fact the opposite is true."

She also shed light on Nationwide's efforts to assist such customers: "At Nationwide, we have worked hard to better equip our colleagues in identifying and supporting customers, as well as investing in new technologies, such as the Experian support hub, which allows people to record their support needs online and share it with multiple service providers simultaneously."