Financial services companies have "little time" to prepare for the regulator's assessment on how they treat vulnerable customers.
According to management consultancy Altus, which has released its white paper: Vulnerability - a travelcard for financial services, there is less than 24 months for businesses to take quantifiable steps towards a true understanding of client vulnerability.
This may not be enough time if businesses have not already started on the journey, it warned.
Jonathan Warren, consultant at Altus, commented: "Vulnerable customers remain a priority and focus for the FCA. The regulator wants to see the industry take action and will assess whether sufficient progress has been made in 2023.
"This leaves little time for financial services firms to prepare."
Moreover, while technological solutions can be found to help improve the customer experience, the 31-page Altus white paper found that, especially as a result of shifting online due to the pandemic, financial services has become less intuitive when it comes to spotting and assessing vulnerability.
It said: "The increase in digital-only, or digitally led operating models, inevitably undermines the ability to use our emotional intelligence and empathy to identify signs of vulnerability."
That is why it is vital that firms have the right systems, policies and software in place to help vulnerable customers, especially when in-person meetings are becoming less prevalent.
To help businesses meet the FCA's standards on demonstrating that they ensure the fair treatment of all customers, data, technology and proper systems will be important, the Altus report claimed.
However, taking findings from its Vulnerability Radar, a software program built by Altus as part of a joint venture with the Tax-Incentivised Savings Association, Altus found that only 45 per cent of financial services products and 19 per cent of systems are currently maximised to help vulnerable customers in particular.
Although 50 per cent of companies have implemented policies to help consumers, this is still a long way off full compliance.
In the report, Altus cited different experiences of clients with various vulnerabilities, stating: "Clearly, we need to make sure we design financial services products and interactions based on much more than simple stereotypes of vulnerability."
The Altus white paper came just a few days after the FCA issued its guidance paper (February 23), in which the City watchdog warned firms could expect to be asked to demonstrate how their business model, actions and culture ensured the fair treatment of all customers, including those deemed vulnerable, on a regular basis.
When the guidance paper was published, Nisha Arora, director of consumer and retail policy at the FCA, said it was more important than ever that firms got the treatment of vulnerable customers "right".
Earlier this month, the regulator revealed 27.7m consumers in the UK can be considered as vulnerable - a significant proportion of society and a stark rise on the 24m people cited as vulnerable by the FCA in February 2020, before the Covid-19 pandemic.
