11 million Brits don’t realise they are financially vulnerable

40% of the UK’s 26 million vulnerable adults don’t realise they are classified as vulnerable, highlighting a need for further clarity and communication from the industry, research from Smart Money People shows.

Financial institutions are required to act to deliver good outcomes for customers, under the consumer protection standards outlined in the FCA’s Consumer Duty, which was brought in July 2023. 

The study found that people in vulnerable situations are 47% more likely to fall victim to scams compared to someone not experiencing any vulnerable circumstances. Those suffering from addiction and those who had recently had a new child were the most likely to be affected. 

A quarter (24%) of vulnerable customers said their circumstances made them more susceptible to fraud and 8% reported they were targeted during times when their emotional state left them unable to think clearly or make sound financial decisions.

The survey found that people have disclosed their situation to banks (58%) and credit card providers (31%) the most out of a list of financial services. Car finance providers (10%) and Buy Now Pay Later platforms (3%) were the least commonly informed.

After disclosing their situation, more than half (52%) of vulnerable consumers said their treatment was more positive than before. This included better customer service (52%), more communication checking in on them (41%), and more information to protect them from fraud or scams (37%). Yet people continue to be unsure about whether or not to open up or if they even qualify.

Life events such as bereavement (21%), ill health (19%), significant work stress (16%), poor mental health (10%), the birth of a child (8%), and divorce (5%) have affected Brits over the past five years, making them vulnerable by the FCA's definition. 

One in six (16%) said their situation made it more difficult to make financial decisions, and a further one in seven (14%) said it distracted them from managing their finances. 

Concerningly, 13% of vulnerable customers said that after they disclosed their situation, they experienced worse treatment. A quarter (24%) of those who received worse treatment reported being ignored by financial providers.

It’s then understandable that those who’ve chosen not to disclose their situation believe that it wouldn’t make a difference to their treatment (18%). Many also have concerns about their privacy (15%), and concerns about stigma or embarrassment (12%). 

Those aged 55 and older were least likely to discuss their situation with financial providers (80% did not tell any of their financial providers). 

Those experiencing relationship breakdown or divorce were also twice as likely (30%) to be concerned about stigma or embarrassment when disclosing this to financial providers.

Jacqueline Dewey, CEO of Smart Money People, said: “Our research shows that vulnerability is far more widespread than many in the industry realise, and often goes unrecognised by customers themselves, meaning vital support is missed.

“Understanding and addressing the needs of vulnerable consumers not only improves outcomes for them but strengthens the industry as a whole. It’s important for providers to implement new or showcase existing support systems that are available to customers.  Consumer Duty exists to ensure customers feel supported by their providers so they can protect their finances and make the best decisions possible. 

“At Smart Money People, we use over 2.5 million independent customer reviews to help financial providers understand where gaps exist and how to close them. These insights are key to raising standards, meeting regulatory expectations, and building deeper trust with all customers, especially those in vulnerable circumstances.”

Kate Pender, CEO at Fair4All Finance, a not-for-profit organisation working to boost financial inclusion, said: “The financial services sector still has a way to go in how it helps and supports vulnerable customers, ensuring that they have the confidence to be transparent about their situation and access the support that they need. As Smart Money People’s research reveals, many people feel uncomfortable talking about their own situation and we can all relate to that.

“Opening up about your position to a financial services provider can be the difference between getting the right support and ending up struggling. We encourage financial services providers who want to do more for their customers in vulnerable circumstances to consider how Fair4All Finance’s tools and resources may help.”