Why financial planning for vulnerable people is so important

Financial planning is an indispensable tool for many people, allowing them to get a handle on their finances and make the most of their money.

For vulnerable people, it’s even more vital. Many vulnerable adults in the UK are unable to access financial services or have a hard time understanding how to make the most of their money.

As a result, financial planning for vulnerable people can be hugely beneficial. So, if you have family members or friends who might be considered vulnerable, here’s why you might want to suggest that they speak to a financial planner.

“Vulnerable” can mean many different things

A good starting point for financial planning and vulnerable people is to understand what it means for someone to be “vulnerable”. This is especially useful as you may not even consider anyone in your family as a vulnerable person when they could be.

The Financial Conduct Authority (FCA), the regulatory body responsible for financial firms in the UK, defines a vulnerable person as:

Someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.

This definition undoubtedly includes those with mental or physical disabilities or disadvantages, as well as people who are temporarily at harm of exploitation.

For example, people in debt or struggling with money could be considered to be at significant risk from scammers with promises of solving their financial woes. As a result, they could also be vulnerable.

28 million adults are financially vulnerable

Unsurprisingly, this definition means that many UK adults are considered to be financially vulnerable.

Indeed, according to the FCA’s Financial Lives 2020 Survey, there were nearly 28 million UK adults with at least one characteristic of vulnerability in October 2020.

This was an increase from February 2020 of more than 3 million adults, as the Covid-19 pandemic made many people’s financial situations even more difficult to deal with.

That means you may well have a family member who would be considered vulnerable, or even who has become vulnerable over the past 18 months.

Vulnerable people need access to financial services – but can struggle to find it

Whether the issues are permanent or temporary, vulnerable people still need access to financial services. Unfortunately, as the FCA’s report reveals, many vulnerable people struggle to manage their money.

Some of the key findings in the report include:

  • 57% of adults with low capability about money and finances said they find it overwhelming or stressful when speaking to providers or finding suitable financial products or services.
  • 33% of adults with poor mental health or low mental capacity said they put off dealing with financial matters, with 29% falling into debt because they couldn’t deal with difficult financial situations.
  • 33% of adults with a physical disability face difficulties getting to a bank branch, with 30% finding it difficult or confusing to use customer services over the phone.
  • 20% of adults who had a relationship breakdown in the past 12 months fell into debt and struggled to manage their money afterwards.

3 ways financial planning can help protect vulnerable adults

If you have a family member that may be considered vulnerable, it may be worth introducing them to a financial planner.

Among a financial planner’s range of services, they’ll be able to assist vulnerable people in a variety of areas to help them become more financially secure.

1. Creating a space for vulnerable people to discuss their money

Firstly, a financial planner can create a space for vulnerable people to discuss their money openly and honestly without judgement.

Discussions about debt or not understanding financial concepts can be embarrassing for some people, especially if they feel that they’re going to be criticised for making poor decisions.

A financial planner is only interested in helping people. That means they’ll take the time to understand someone’s position first and offer guidance and support that’s relevant to them in response.

2. Explaining products and services so that they’re clear

As the FCA research shows, one barrier that can prevent vulnerable adults from managing their money is the complexity of different financial products and services. This could be due to lower cognitive ability, disability, or simply just age.

A financial planner can help by looking at a vulnerable person’s wider financial situation, and then developing a financial plan with recommendations for products and services that are suitable for them.

Crucially, a planner can explain these products and services in straightforward terms, so that a vulnerable adult can understand how they can help them and why it would be useful.

3. Protecting vulnerable family members from bad actors

Often, vulnerable individuals can be at greater risk of being victims of fraud or scams.

In fact, according to research from the Money and Mental Health Policy Institute, vulnerable people are “easy prey” for scammers, with individuals suffering from mental health issues three times more likely to fall victim to an online scam.

Additionally, there could also be a risk from within a vulnerable person’s family. While they may not have a deliberate intent to cause harm, other family members may inadvertently abuse a vulnerable person financially by asking for money or making financial suggestions that aren’t suitable for them.

This is just as much a risk to their wellbeing as scammers and fraudsters, as it could see them put their money at risk without fully understanding what they’re being asked to do.

A financial planner can help here by putting structures in place that protect a vulnerable person’s income. For example, they might suggest putting money in trust so that the vulnerable adult’s money is ringfenced from anyone who might not act in their best interest.

Work with us

If you’d like to find out about how working with a financial planner can help to protect a vulnerable person in your life, please speak to us at Britannic Place.

Email info@britannicplace.co.uk or call 01905 419890 to find out more.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

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