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Vulnerable Client Protection in Estate Planning: FCA Requirements and Ethical Practice

· 18 min

Executive Summary

Estate planning engagements disproportionately involve clients presenting characteristics of vulnerability -- cognitive decline, bereavement, ageing-related health conditions, and diminished financial resilience. The FCA's Financial Lives 2024 survey found that 49% of UK adults display at least one vulnerability characteristic, yet the FCA's Dear CEO letter to wealth management and stockbroking firms (November 2023) found that 49% of portfolio managers and 69% of stockbrokers identified zero vulnerable customers in their client bases -- a pattern the FCA's multi-firm review (March 2025) confirmed persists across the sector.1 This systemic identification failure has prompted the FCA to designate wealth management vulnerability practices as a Consumer Duty focus area for 2025-26. This article examines the tripartite compliance framework created by the intersection of the FCA's Consumer Duty (PRIN 2A), the Mental Capacity Act 2005, and the Equality Act 2010, and provides an operational framework for embedding vulnerability competence across estate planning advisory touchpoints.

1. The Vulnerability Landscape in Estate Planning

Estate planning occupies a distinctive position within financial advisory practice. The clients who seek estate planning services -- pension holders reviewing death benefit nominations, individuals instructing wills following bereavement, families establishing trusts for intergenerational wealth transfer, and older clients considering lasting powers of attorney -- present an unusually high concentration of the vulnerability drivers that the FCA identifies in its Finalised Guidance FG21/1.2

The FCA's Financial Lives 2024 survey, based on fieldwork with 17,950 respondents between February and June 2024, established that 49% of UK adults (26.4 million people) display one or more characteristics of vulnerability under the updated measurement algorithm.3 The survey's tracking data reveals a persistent baseline: under the original algorithm enabling like-for-like comparison, vulnerability prevalence moved from 51% in 2017 to 44% in 2024, peaking at 53% during the pandemic in October 2020.4 Low financial resilience -- the capacity to absorb financial shocks -- increased from 22.8% in 2020 to 24.4% in 2022, indicating that even as headline vulnerability rates moderated, certain drivers intensified.

FG21/1 organises vulnerability around four drivers, each of which maps directly to estate planning advisory encounters.2 Health conditions affecting day-to-day functioning -- including cognitive decline, dementia in its early stages, and chronic illness -- frequently arise in conversations about testamentary capacity and lasting power of attorney arrangements. Life events such as bereavement, divorce, and serious illness are often the catalysts that bring clients to estate planning advisers in the first instance. Resilience limitations, including low savings buffers and over-indebtedness, affect how clients approach decisions about asset protection and trust structures. Capability constraints, encompassing low financial literacy and limited digital skills, directly impair a client's ability to engage with increasingly complex estate planning instruments.

The disclosure gap compounds these structural risks. The FCA's consumer research conducted as part of the multi-firm review, based on 1,500 individuals identified as vulnerable, found that only four in ten disclosed their vulnerability characteristics to their financial services provider.5 Of those who did disclose, approximately half were prompted to do so by the provider -- suggesting that passive reliance on client self-identification misses the majority of vulnerability presentations. A quarter of vulnerable consumers reported feeling uncomfortable explaining their situation.5 For estate planning practitioners, where discussions routinely involve mortality, family conflict, and diminished capacity, the implications are considerable: the advisory process itself must be designed to identify vulnerability proactively rather than waiting for disclosure.

2. The Regulatory Framework: A Tripartite Obligation

2.1 FCA FG21/1: The Continuing Foundation

FG21/1 defines a vulnerable customer 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."2 The multi-firm review confirmed that this guidance remains operative under the Consumer Duty. Stakeholders including firms, trade associations, consumer organisations, and academics agreed the guidance remains "useful and important," and the FCA determined that it would not revise FG21/1 or introduce new requirements, opting instead to publish additional case studies illustrating good and poor practice.5

This retention is significant for practitioners. FG21/1 provides the operational detail -- the four drivers, the skills and capability expectations for staff, the monitoring and evaluation framework -- that underpins the Consumer Duty's higher-level outcome requirements. The guidance explicitly states that "all relevant staff should understand how their role can affect vulnerable consumers," extending responsibility from frontline advisers through to back-office and support staff.2

2.2 Consumer Duty (PRIN 2A): The Elevated Standard

The Consumer Duty, comprising Principle 12 and PRIN 2A, has been in force since July 2023 for open products and July 2024 for closed products.6 It imposes a materially higher standard than FG21/1 alone. Where FG21/1 requires firms to treat vulnerable customers fairly, PRIN 2A requires firms to act to deliver good outcomes for all retail customers, including those with vulnerability characteristics, across four outcomes.

PRIN 2A.3 mandates that product and service approval processes must ensure offerings do not adversely affect groups of retail customers presenting vulnerability characteristics.7 In estate planning, this applies to the design of advisory service propositions, fee structures, and the range of solutions offered -- a firm whose estate planning proposition relies exclusively on digital onboarding, for instance, may fail clients with capability-related vulnerability.

PRIN 2A.5 requires that communications be tailored to meet the information needs of customers with vulnerability characteristics.8 Estate planning communications -- suitability reports, trust deeds, pension nomination forms -- are inherently complex. The obligation extends beyond producing documents in accessible formats to ensuring that the substance and timing of communications account for a client's capacity to process information.

PRIN 2A.6 addresses consumer support, requiring that support structures be designed and delivered to meet the needs of clients with vulnerability characteristics.9 For estate planning firms, this encompasses appointment scheduling flexibility, the availability of follow-up discussions, the option for clients to bring a trusted third party, and the firm's approach to pace and duration of advisory meetings.

PRIN 2A.9 requires firms to monitor outcomes and identify whether groups of customers experience differential outcomes -- a critical obligation for vulnerability monitoring that demands disaggregated analysis of client cohorts.6

2.3 COCON: Individual Accountability

The Code of Conduct sourcebook applies to all conduct rules staff within Senior Managers and Certification Regime firms. Individual Conduct Rule 4 requires due regard to customer interests and fair treatment, applying regardless of whether the individual has direct customer contact.10 Individual Conduct Rule 6, introduced alongside the Consumer Duty, imposes what the FCA describes as a "higher and more exacting standard" for delivering good outcomes in retail market business.11

The interaction between COCON and vulnerability practice is direct: an adviser who fails to recognise or respond to vulnerability indicators during an estate planning engagement may face individual regulatory exposure under Rule 6, independent of any firm-level enforcement action. Senior Manager Conduct Rules SC1-SC4 extend this to effective control, regulatory compliance, and appropriate delegation -- senior managers who fail to ensure adequate vulnerability training and processes are personally accountable.

FCA Policy Statement PS25/23, addressing non-financial misconduct and taking effect from 1 September 2026, adds a further dimension: the vulnerability characteristics of the subject of misconduct will be a factor in determining COCON breach severity.12

The Mental Capacity Act 2005 establishes five statutory principles that operate independently of FCA regulation and apply whenever questions of decision-making capacity arise in estate planning contexts.13

The first principle -- the presumption of capacity -- is foundational. A person must be assumed to have capacity unless it is established otherwise. Practitioners must not refuse to provide estate planning advice on the basis of age, diagnosis, or appearance alone. The second principle requires that all practicable steps be taken to help a person make their own decision before any conclusion of incapacity. In estate planning, this translates to communication adaptations: simplified language, visual aids, multiple meetings, involvement of family members at the client's request, and appropriate meeting environments.13

The third principle -- that an unwise decision does not indicate incapacity -- is particularly relevant in estate planning, where clients may make testamentary dispositions that advisers consider inequitable or financially suboptimal. The MCA protects the right to make decisions that others might disagree with, provided the individual has capacity to make them.

Testamentary capacity itself is assessed under the common law test from Banks v Goodfellow (1870), requiring the testator to understand the nature of making a will, the extent of their property, and the claims of those who might expect to benefit.13 Financial advisers are not qualified to conduct formal capacity assessments but must recognise indicators and take appropriate steps -- suggesting independent medical assessment where concerns arise, involving appropriate adults, and adapting communication methods to support the client's decision-making.

2.5 Equality Act 2010: The Dual Compliance Obligation

FG21/1 explicitly states that a breach of the Equality Act 2010 -- for example, failure to provide reasonable adjustments for disabled people -- "will also be a breach of the FCA's rules."14 This creates dual regulatory exposure: a firm that fails to make reasonable adjustments for a client with a disability that constitutes a vulnerability characteristic faces potential action from both the FCA and the Equality and Human Rights Commission, with which the FCA maintains a memorandum of understanding on equalities issues in financial services.

The overlap between health as a vulnerability driver and disability under the Equality Act is "substantial," as FG21/1 acknowledges.2 Estate planning practitioners working with clients who have hearing impairments, visual impairments, learning disabilities, or mental health conditions must consider both the Equality Act's reasonable adjustment duty and FG21/1's vulnerability requirements simultaneously. Protected characteristics under the Equality Act -- particularly age and disability -- frequently correlate with vulnerability drivers, reinforcing the need for advisory processes that address both frameworks in an integrated manner rather than treating them as separate compliance obligations.

3. FCA Findings and the Wealth Management Gap

The FCA's Dear CEO letter to wealth management and stockbroking firms (November 2023) exposed a sector-specific failure in vulnerability identification that has direct implications for estate planning advisory firms. The letter found that 49% of portfolio managers identified zero vulnerable customers in their client bases, a figure that rose to 69% among stockbrokers.1 The multi-firm review (March 2025), which surveyed 725 firms, confirmed that this identification gap persists across the sector.5 Given that approximately half the UK adult population displays at least one vulnerability characteristic at any time, the FCA concluded that these firms "are not thinking widely enough on vulnerability."5

The Consumer Duty focus areas for 2025-26 converted this finding into a stated regulatory priority. The FCA specifically identified "poor identification of clients with characteristics of vulnerability by wealth managers" as an area requiring improvement, to be pursued through regional "Raising Standards Together" events.15 For estate planning advisory firms that fall within the wealth management perimeter -- including firms advising on pension death benefits, investment-linked estate planning, and trust asset management -- this represents an explicit supervisory signal.

The multi-firm review distinguished between good and poor practice with instructive specificity.16 Firms demonstrating good practice embedded vulnerability identification at multiple client journey touchpoints, trained all staff (not only advisers) to recognise vulnerability indicators, recorded vulnerability data to enable outcome monitoring, and conducted regular reviews of whether vulnerable clients achieved comparable outcomes to other clients. Poor practice included blanket age-based vulnerability categorisation -- automatically assessing all consumers above a certain age as vulnerable -- which the FCA identified as a generalised approach that "risks failing to tailor support to individual needs."16

The "policy/practice gap" identified in FG21/1 remains pronounced. Many firms possess adequate vulnerability policies on paper but fail to translate those policies into consistent advisory practice. The FCA's good practice examples emphasise that effective vulnerability management requires cultural embedding, not merely procedural compliance -- a distinction that resonates particularly in estate planning, where the emotional and cognitive dimensions of client interactions demand genuine practitioner skill rather than checklist adherence.

4. An Operational Framework for Estate Planning Practitioners

4.1 Vulnerability Identification at Estate Planning Touchpoints

Estate planning advisory processes present multiple points at which vulnerability characteristics may emerge, each requiring distinct identification approaches.

During initial engagement and fact-finding, practitioners should assess not only the financial data conventionally gathered but also the client's communication preferences, the presence of accompanying individuals, any expressed anxieties about the advisory process, and indicators of cognitive difficulty such as repetition, confusion about recent events, or difficulty retaining information between meetings. FG21/1 emphasises that vulnerability should be assessed on a spectrum rather than as a binary classification.2

Will instruction meetings present specific vulnerability considerations. Bereavement is frequently the trigger for will revision, meaning clients may present with acute emotional distress. Family pressure or undue influence is a recognised risk in testamentary contexts, and practitioners should be alert to situations where a beneficiary is directing instructions or attending meetings uninvited.

Pension death benefit nomination reviews, which the residence-based IHT regime changes from April 2025 and the forthcoming pension death benefit taxation from April 2027 will make increasingly necessary, require practitioners to discuss mortality and financial provision after death -- conversations that may cause significant emotional distress and are particularly challenging for clients experiencing health-related vulnerability.17 The expanded scope of estate planning under the new IHT framework, which replaces the domicile-based system with a 10/20-year long-term resident test, will draw more clients into advisory conversations, including older clients and those with complex cross-border arrangements who may present multiple vulnerability characteristics. The frozen nil-rate band and residence nil-rate band through 2030-31 compound this effect through fiscal drag, further expanding the population of estates requiring active planning.

Lasting power of attorney discussions require particular sensitivity, as they involve a client contemplating their own potential loss of capacity. The MCA's requirement to take all practicable steps to support decision-making means practitioners should not avoid these discussions but must conduct them in a manner that respects the client's autonomy and emotional wellbeing.13

Trust establishment conversations present an additional touchpoint where vulnerability identification is essential. The creation of discretionary trusts, life interest trusts, or vulnerable person trusts often involves clients navigating complex family dynamics -- including estranged children, second marriages, and dependants with disabilities -- that may amplify emotional and cognitive strain during advisory meetings.

4.2 Capacity Assessment: Recognise, Respond, Refer

Financial advisers occupy a specific position in the capacity assessment framework. They are not qualified to make formal determinations of mental capacity -- that function is reserved for medical professionals or the Court of Protection. However, practitioners have a duty to recognise indicators that capacity may be impaired and to respond proportionately.13

Where an adviser has concerns about a client's capacity, appropriate responses include suggesting that the client obtain an independent capacity assessment before proceeding, offering to pause the advisory process to allow time for reflection, involving a trusted family member or independent advocate at the client's request, and adapting communication methods. The MCA's presumption of capacity means that concern alone is insufficient grounds to refuse service -- the adviser must take practicable steps to support the client's decision-making before concluding that capacity is absent.

4.3 Data Recording and the FCA-ICO Joint Guidance

The tension between recording vulnerability data for outcome monitoring under the Consumer Duty and GDPR and Data Protection Act 2018 compliance represents one of the most frequently cited operational challenges for advisory firms. FG21/1 includes an appendix addressing GDPR considerations, but firms continue to report uncertainty about the lawful basis for processing vulnerability data, the extent of information that should be recorded, and retention periods.2

The FCA and ICO committed to providing joint clarity on the interaction between vulnerability, data sharing, and data protection expectations during Q1 2026; as of February 2026, this guidance had not yet been published.15 This anticipated guidance represents a significant operational milestone. Firms should prepare by auditing current vulnerability data practices, identifying gaps between existing recording approaches and the outcome monitoring requirements of PRIN 2A.9, and ensuring that privacy notices and consent mechanisms are sufficiently comprehensive to support vulnerability-related data processing.

4.4 Industry Frameworks and Professional Development

The CII and PFS released practical guidance for supporting vulnerable customers in November 2025, described by PFS president Carla Brown as emphasising that "supporting clients in vulnerable circumstances is fundamental to good financial planning."18 This guidance provides a roadmap for firms seeking to translate principle-based Consumer Duty obligations into operational processes, including frameworks for assessing customer needs and improving outcomes.

Additionally, ISO 22458:2022 (Consumer Vulnerability -- Requirements and Guidelines for Inclusive Service) offers a complementary international standard, with BSI Kitemark certification available for organisations demonstrating systematic commitment to supporting consumers in vulnerable circumstances.18 While certification is voluntary, it provides an external validation mechanism that firms may find valuable in demonstrating compliance to the FCA.

5. Enforcement Risk and Commercial Considerations

5.1 The Enforcement Trajectory

FCA enforcement fines rose sharply in calendar year 2024, with total fines of GBP 176 million representing a 230% increase from 2023.19 Within this total, three specific fines totalling GBP 22.6 million related to customer treatment failures: TSB Bank (GBP 10.9 million affecting 232,849 customers with GBP 99.9 million in redress), HSBC and Marks and Spencer Bank (GBP 6.2 million affecting 1.5 million customers with GBP 185 million in redress), and Volkswagen Financial Services (GBP 5.4 million affecting 110,000 customers with GBP 21.5 million in redress).19 Total redress payments accompanying enforcement actions reached GBP 514 million.

These cases concerned customer treatment in financial difficulty contexts rather than estate planning vulnerability specifically. However, they illustrate the FCA's willingness to impose material financial penalties where firms fail to deliver appropriate outcomes for customers requiring additional support -- a trajectory that, combined with the Consumer Duty's explicit vulnerability provisions and the designation of wealth management vulnerability identification as a 2025-26 focus area, signals escalating regulatory risk for advisory firms.

In fiscal year 2024/25, the FCA issued 37 Final Notices and cancelled the authorisation of 1,456 firms.20 Enforcement operations reduced from 188 to 130, reflecting faster case resolution rather than reduced activity -- a pattern consistent with a regulator prioritising impactful outcomes over volume.

5.2 The Commercial Case for Vulnerability Competence

Beyond regulatory risk mitigation, vulnerability competence offers demonstrable commercial advantages for estate planning advisory firms. Professional Adviser's dedicated "Best Adviser Firm for Vulnerable Client Care" award category reflects growing recognition that vulnerability practice differentiates firms in a competitive market. Firms that demonstrate genuine capability in supporting clients with vulnerability characteristics are positioned to receive referrals from solicitors, accountants, and other professional intermediaries who require confidence that their clients will receive appropriate care.

Client retention is also a material factor. Estate planning relationships are inherently long-term, often spanning decades and extending across generations. A firm's capacity to support clients through periods of vulnerability -- bereavement, cognitive decline, financial crisis -- directly affects the durability of those relationships and the likelihood of intergenerational referral. Professional indemnity considerations further reinforce the case: firms with robust vulnerability frameworks are better positioned to defend against complaints alleging failure to identify or accommodate client needs, reducing both the frequency and severity of claims.

Conclusion

The convergence of the FCA's Consumer Duty, the Mental Capacity Act 2005, and the Equality Act 2010 creates a compliance framework that estate planning practitioners cannot address through any single regulatory lens. Each framework imposes distinct obligations -- outcome delivery, decision-making support, and reasonable adjustment respectively -- that collectively demand an integrated operational approach.

The FCA's multi-firm review and the designation of wealth management vulnerability identification as a 2025-26 priority area confirm that this is not a theoretical compliance consideration. The residence-based IHT regime from April 2025 and the forthcoming pension death benefit taxation from April 2027 will expand the pool of clients requiring active estate planning, bringing more individuals with vulnerability characteristics into advisory encounters. The FCA-ICO joint guidance on vulnerability data sharing, committed for Q1 2026 but not yet published as of February 2026, will further reshape operational requirements once released.

For estate planning advisory firms, the path forward requires cultural and operational commitment: embedding vulnerability identification across all advisory touchpoints, training all staff -- not solely client-facing advisers -- to recognise vulnerability indicators, building recording systems that enable meaningful outcome monitoring under PRIN 2A.9, and recognising that vulnerability competence is a core professional skill rather than a compliance obligation to be minimised.

CPD Declaration

Estimated Reading Time: 20 minutes Technical Level: Advanced Practice Areas: Estate Planning, Regulatory Compliance, Vulnerable Client Management, Consumer Duty

Learning Objectives

Upon completing this article, practitioners will be able to:

  1. Identify the four FCA vulnerability drivers and map each to specific estate planning advisory touchpoints
  2. Distinguish between the obligations imposed by FG21/1, PRIN 2A, the Mental Capacity Act 2005, and the Equality Act 2010 when advising clients with vulnerability characteristics
  3. Evaluate current firm vulnerability identification practices against the FCA's December 2025 good practice and poor practice findings
  4. Apply the Mental Capacity Act's five statutory principles to capacity-related decisions arising during estate planning advisory engagements

FCA Competency Mapping

  • Regulatory Environment: Understanding of FCA Consumer Duty obligations (PRIN 2A) and their application to vulnerable clients
  • Ethics and Integrity: Application of MCA 2005 principles and Equality Act 2010 reasonable adjustment duties within advisory practice
  • Client Engagement: Adapting advisory processes, communications, and support structures for clients presenting vulnerability characteristics

Reflective Questions

  1. How does your firm currently identify vulnerability characteristics at each stage of the estate planning advisory process, and what gaps exist relative to the FCA's good practice examples from the December 2025 review?
  2. What steps would you implement to ensure that your vulnerability data recording practices are prepared for the anticipated FCA-ICO joint guidance on data sharing?
  3. How would you apply the Mental Capacity Act's presumption of capacity when a client's family members express concerns about the client's decision-making, while the client appears to understand the advisory discussion?

Professional Disclaimer

The information presented reflects the regulatory and legislative position as of 2026-02-04. Regulations, tax rules, and professional guidance are subject to change. Readers should independently verify all information before acting and seek advice from appropriately qualified solicitors, financial advisors, or other professionals for their specific circumstances.

Neither WUHLD nor the author accepts liability for any actions taken or decisions made based on the content of this article. Professional readers are reminded of their own regulatory obligations and duty of care to their clients.

Footnotes

Footnotes

  1. FCA Dear CEO Letter: Wealth Management and Stockbroking Firms (8 November 2023). https://www.fca.org.uk/publication/correspondence/portfolio-letter-wealth-managers-stockbrokers.pdf ↩ ↩2

  2. FCA Finalised Guidance FG21/1: Guidance for firms on the fair treatment of vulnerable customers (February 2021). https://www.fca.org.uk/publication/finalised-guidance/fg21-1.pdf ↩ ↩2 ↩3 ↩4 ↩5 ↩6 ↩7

  3. FCA Financial Lives 2024 Survey: Vulnerability and Financial Resilience Report (2025). https://www.fca.org.uk/publication/financial-lives/fls-2024-vulnerability-financial-resilience.pdf ↩

  4. FCA Financial Lives 2024 Survey: Key Findings (2025). https://www.fca.org.uk/publication/financial-lives/financial-lives-survey-2024-key-findings.pdf ↩

  5. FCA Multi-Firm Review: Firms' Treatment of Vulnerable Customers (March 2025). https://www.fca.org.uk/publications/multi-firm-reviews/firms-treatment-vulnerable-customers ↩ ↩2 ↩3 ↩4 ↩5

  6. FCA PRIN 2A: The Consumer Duty. https://handbook.fca.org.uk/handbook/prin2a ↩ ↩2

  7. FCA PRIN 2A.3: Products and Services Outcome. https://www.handbook.fca.org.uk/handbook/PRIN/2A/3.html ↩

  8. FCA PRIN 2A.5: Consumer Understanding Outcome. https://www.handbook.fca.org.uk/handbook/PRIN/2A/5.html ↩

  9. FCA PRIN 2A.6: Consumer Support Outcome. https://www.handbook.fca.org.uk/handbook/PRIN/2A/6.html ↩

  10. COCON 2.1: Individual Conduct Rules. https://handbook.fca.org.uk/handbook/COCON/2/1.html ↩

  11. COCON 4.1: Guidance on Individual Conduct Rules. https://www.handbook.fca.org.uk/handbook/COCON/4/1.html ↩

  12. FCA Policy Statement PS25/23: Tackling Non-Financial Misconduct (December 2025). https://www.fca.org.uk/publication/policy/ps25-23.pdf ↩

  13. Mental Capacity Act 2005. https://www.legislation.gov.uk/ukpga/2005/9/contents ↩ ↩2 ↩3 ↩4 ↩5

  14. FG21/1 and Equality Act 2010 intersection (February 2021). https://www.fca.org.uk/publication/finalised-guidance/fg21-1.pdf ↩

  15. FCA Consumer Duty Focus Areas 2025-26. https://www.fca.org.uk/publications/corporate-documents/consumer-duty-focus-areas ↩ ↩2

  16. FCA Good and Poor Practice: Delivering for Vulnerable Customers (March 2025, updated December 2025). https://www.fca.org.uk/publications/good-and-poor-practice/delivering-vulnerable-customers ↩ ↩2

  17. Gov.uk: Inheritance Tax if You're a Long-Term UK Resident (April 2025). https://www.gov.uk/guidance/inheritance-tax-if-youre-a-long-term-uk-resident ↩

  18. CII: Managing Customer Vulnerability in Insurance and Personal Finance -- A Practical Implementation Guide (November 2025). https://www.cii.co.uk/learning/learning-content-hub/articles/managing-customer-vulnerability-in-insurance-and-personal-finance-a-practical-implementation-guide/4e49e0a1-7607-4cb4-b22b-8ba6825b6b48 ↩ ↩2

  19. FCA 2024 Fines Summary. https://www.fca.org.uk/news/news-stories/2024-fines ↩ ↩2

  20. FCA Enforcement Data 2024/25. https://www.fca.org.uk/data/fca-operating-service-metrics-2024-25/enforcement-data ↩

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