6. Vulnerability and financial capability
Advisers can assess an individual’s financial capability through four areas: managing money, planning ahead, choosing products and staying informed. Those at most risk of harm or damage are below average in all four of these areas. Clients who are more likely to face challenges with financial capability are those who are single, unemployed, below the age of 35, social tenants and/or without educational qualifications.
These clients often lack confidence with managing money and can find it difficult to communicate concerns they have about their finances.
This may be for a number of reasons, including that they have:
•variable income;
•little or no savings;
•restricted access to financial products and services;
•behaviours and preferences that lead to increased costs of mainstream products that lead to choosing higher-priced everyday products;
•low confidence, which undermines their choices;
•failed to recognise a problem or get help at the right time.
Clients who have lower than average financial capability may:
•choose the wrong financial products;
•pay a high price unnecessarily;
•be treated unfairly by their chosen provider;
•get into unmanageable or problem debt.