Signs of financial vulnerability: how the FCA says to spot them
The FCA's guidance and its reviews point to specific financial-stress indicators. Recognising them is the first step; documenting that you checked is the evidence.
What the FCA says about spotting financial vulnerability
FG21/1, the FCA's finalised guidance on the fair treatment of vulnerable customers, frames vulnerability through the resilience and capability drivers, and its multi-firm reviews point to the concrete money-side signals. The FCA's Consumer Duty pages and the Consumer Duty publications library hold the guidance and the good-practice examples firms work from.
The practical lesson from enforcement and review work, including the FCA's Enforcement Watch series, is the same: it is not the sign that causes the problem, it is the unrecorded check. Advisers notice, but the notice never reaches the file.
The financial-stress indicators to check
Mortgage arrears or rent arrears
Missed payments or arrears on housing costs — a resilience signal that affects the client's ability to absorb loss.
Missed or late payments
Repeated missed bills or loan payments, or difficulty with existing commitments — an indicator of low financial resilience.
Debt or borrowing pressure
High borrowing relative to income, or reliance on credit for essentials — a capability and resilience flag.
Coercion or third-party pressure
Signs the client is being influenced or pressured in financial decisions — a vulnerability the file must record.
Sudden circumstance changes
Bereavement, job loss, divorce, or illness — events that change capacity to engage and are often accompanied by financial stress.
Worked example: the check that leaves a record
One client, two ways of handling the same observation. Anonymised and illustrative.
Before
The adviser noticed the client had missed two mortgage payments and mentioned it in the meeting. Nothing was written down. At review time there is no trace of the observation or what the adviser did about it.
After
The file records: “Mortgage arrears noted at the [date] meeting. Resilience driver checked — short-term income gap identified. Outcome: indicators present. Adjustments made: review timeline extended, fees spread over two quarters, and a named contact for the client.” A reviewer can follow the whole chain.
Common mistakes when checking for signs
- The conversation-only check. The sign was discussed but never recorded, so the file cannot show the consideration.
- The sign without the outcome. A missed payment logged as a fact, with no record of what was decided or adjusted.
- Checking only at the point of sale. Vulnerability arrives between reviews; the check points must include triggers.
- Treating disclosure as the only source. Some signs are visible in the client's circumstances even when the client does not volunteer them.
The signs at a glance
| Sign | What to record | Why it matters |
|---|---|---|
| Mortgage or rent arrears | The observation, the driver checked, the outcome. | A resilience signal that affects capacity to absorb loss. |
| Missed or late payments | What was missed, for how long, what was decided. | An indicator of low financial resilience. |
| Debt or borrowing pressure | Borrowing relative to income, reliance on credit. | A capability and resilience flag. |
| Coercion or third-party pressure | The indication and the response. | A vulnerability the file must record. |
| Sudden circumstance changes | The event and the reassessment it triggers. | Capacity to engage changes with life events. |
Related reads
This check list is one part of the vulnerable customers hub. Use the four-driver breakdown to map each sign to its driver, and the per-file adjustment checklist for what changes once a sign is logged.
Frequently asked questions
Are these signs a diagnosis?
No. They are indicators to check, not verdicts. A missed payment or arrears may have a benign explanation; what the file must show is that the sign was noticed, checked, and its outcome recorded.
What if a client hides financial stress?
Some signs are visible without disclosure — missed or late payments, arrears, reliance on credit — and can be checked against the client's situation. The file records that the check happened.
How often should I check for these signs?
At suitability and again at every review, and whenever a trigger appears between reviews — a change of job, a bereavement, a complaint about debt. The annual review alone misses what arrives in between.
Your next step
Add the five-sign check to the next suitability file you open, and record the outcome even when nothing is found. Start a free trial or see pricing.