When we explore these findings further, it is apparent that introducing a level of severity for health and life events based on the impact it has on day-to-day living significantly reduces the number of vulnerable/highly vulnerable respondents, showing the importance of capturing an interference rating.

However, when we include psychometric questions to further examine resilience and capabilities, we observe an increase in the proportion who are considered vulnerable/highly vulnerable, which highlights the need to cover areas such as emotional resilience and financial self-efficacy, as suggested in previous research, within a vulnerability assessment (see chart below).

We obtained access to the full Financial Lives survey (2020) dataset; adjusting the scoring methodology used here led to approximately 1 per cent of those who have an addiction that affects them a little (moderate) to be classified as not vulnerable by the FCA, with a further 3.2 per cent who had a hearing or visual impairment, 10.5 per cent who were physically disabled and 8.2 per cent who had a mental health illness also being misclassified (see chart below).

This is a significant proportion of individuals who could miss out on appropriate treatment either because they did not choose to classify their conditions as severe enough to be noticed, or because grouping those who struggle a little with those who are healthy is not ideal. 

Some final considerations

Although those who perceive themselves to be vulnerable have significantly more characteristics of vulnerability, people often underestimate their vulnerabilities.

Only 14 per cent of respondents perceive themselves as being vulnerable, and a huge 76 per cent of those who were deemed vulnerable according to the algorithm categorised themselves as being “not vulnerable”.

Therefore, although there is a significant relationship between perceived vulnerability and results of the assessment, it is likely that individuals are less inclined to rate themselves as being vulnerable although they may struggle in terms of their health, life events, resilience and/or capabilities.

This further emphasises the importance of gaining further insight into the severity of vulnerable characteristics.

Characteristics relating to the vulnerability drivers listed by the FCA can differ for each client and this signifies the importance of understanding clients' individual differences, not classifying clients based on stereotypes or physical characteristics.

Using a well-designed assessment that is in line with the consumer duty can enable you to understand those who are highly vulnerable and susceptible to harm in order to provide them with appropriate support, helping your clients to grow and elevate their levels of wellbeing.

Louis Williams is head of psychology and behavioural insights at Dynamic Planner