Helping vulnerable clients de-risk their retirement

Andrew Tully Technical Director at Canada Life discusses the rise of vulnerable clients at retirement and how financial advisers can help while adhering to FCA guidance on the issue. 

When we talk about financial vulnerability, it usually conjures up images of people with no money struggling to make ends meet. But the reality is that anyone can be financially vulnerable. Whether you are rich, poor, young or old, it comes in many different guises. It can be there for everyone to see, or so well hidden that even the person with the vulnerability doesn’t know it’s there. It can be permanent or temporary, and it could be realised or unrealised.

This issue is not new, but it has become particularly prevalent in the wake of pension freedoms and ensuring people don’t outlive their savings.

The risks facing vulnerable clients

The introduction of pension freedoms and the subsequent rise in non-advised flexi-access drawdown sales has potentially worrying consequences, which have set the regulator’s alarm bells ringing. And it’s easy to see why. The FCA’s Retirement Outcomes Review found that: 

  • 33% of non-advised consumers have their drawdown investments in cash, receiving low rates of interest and missing out on potential investment returns.
  • 94% of non-advised clients had taken the default route of setting up drawdown with their original pension provider, meaning it may not be the most suitable product for them.

As a result, there are swathes of potentially vulnerable clients who may well outlive their savings. This might be because they are under invested, meaning a risk averse approach could result in lower returns and irreparable losses. Or they may be taking too much risk, leaving them open to volatility and sequencing risk. 

At the same time, they may also be paying unnecessary charges. It’s this susceptibility to financial loss that underlines how important the role of a financial adviser is in navigating the potential pitfalls of financing retirement. 

How can advisers help vulnerable clients?
In July 2019, the FCA published their guidance on the fair treatment of vulnerable clients. Running to 69 pages, it wasn’t for the faint hearted, and this alone underlined the complexity of the issue. It broadly defines what it means to be vulnerable as ‘someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care’.

Such customers are particularly at risk of buying products or services they don’t need, that are inappropriate, or worse - succumbing to scams.

In its report, the FCA helpfully laid out the drivers of vulnerability (see table 1). While an adviser can’t be expected to play the role of a doctor or psychologist, the table shows that for each of the stated drivers, you are ideally placed to identify and address them.

Drivers of vulnerability

How advisers can manage these drivers


Health conditions that affect the client’s ability to carry out day to day tasks, or underlying health issues that may impact on the client’s longevity.

Since the advent of the enhanced annuity, taking health into account when making recommendations should already be fully integrated into the retirement advice process. And as a client’s health condition changes over time, an adviser can change their recommendations accordingly.

Life events

Major life events such as bereavement or the breakdown of a relationship.

Due to the personal nature of their service, advisers are well placed to get a sense of major life events and if/ how they will impact on a client’s financial wellbeing. Of course, such events can take anyone by surprise, which makes regular financial reviews with an adviser even more important.


Understanding how a client can withstand financial or emotional shocks.

Investment diversification, and carefully managing the timing and source of withdrawals is key to the longer-term resilience of a client’s retirement savings. As an adviser, you have access to complex modelling tools which can be used to plan for different scenarios, and help the client understand the risks they face. You are also best placed to recommend and flex the correct investment strategy to mitigate these risks.


This refers to the amount of knowledge the client has on financial matters, or the confidence they have in managing their money.

By taking financial advice, a client is seeking the help and guidance of an expert. The key here is ensuring you review your clients’ retirement plans regularly and have fully documented your conversations.

The regulator’s expectations of advisers

While advisers are undoubtedly best placed to help vulnerable clients, this comes with certain responsibilities. The FCA published the Product Intervention and Product Governance Sourcebook (PROD) in January 2018. It states that an adviser must: 

  • Detail the fees the client has paid for both the advice they have received and the investments into which their money is placed. And this must be done annually.
  • Ensure that the cost and service offered is appropriate for that client.
  • Fully understand the financial instruments they are recommending.
  • Assess the compatibility of the financial instruments with the needs of their client, considering the manufacturer’s identified characteristics of the target client.
  • Ensure that financial instruments are only recommended when this is in the best interests of the client.
  • Consider the impact of cost and the financial strength of the provider on their client.


This is an incredibly important issue, and one that we must take seriously as an industry. Advisers and providers need to work closely together to protect all clients in retirement – not just those deemed to be vulnerable. In practice we know that means spending more time with your retirement clients throughout the advice process, and through subsequent regular reviews.

That’s why our focus is on helping you streamline your service while giving you confidence that you’re recommending a bespoke, flexible and reliable solution that demonstrates good value for money.

Andrew Tully
Technical Director



Canada Life Limited, registered in England no. 973271. Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Telephone: 0345 6060708 Fax: 01707 646088

Member of the Association of British Insurers. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.