Oxford Risk finds that wealth mangers ‘rely on intuition’ for their assessments

More than half (52%) of Australian wealth managers claim to rely on mainly intuition when assessing client risk suitability and recommending appropriate investments, research from behavioural finance experts Oxford Risk says. The study with wealth managers who collectively manage assets of around $232 billion, found that they are not just relying on their intuition.

What were the key findings of the research study?

Around 86% say they have good tools and systems to back their intuition on what will work for investors. Around 2 out of 3 (67%) believe there is sufficient technology available in the marketplace to help them assess clients’ risk suitability. Research shows there is still support for better systems to help them improve service to clients and better assess risk suitability.

Around two-thirds (66%) admit that existing systems are reliant on subjective human judgements and nearly three-quarters (73%) admit existing systems are too cumbersome to respond adequately to changes in clients’ circumstances which has been an issue in light of recent volatility following the financial impact of COVID-19, rising inflation and interest rates.

What is the market offering of Oxford Risk?

Oxford Risk, which launched in Australia nearly two years ago, builds software to help wealth managers and other financial services companies assist their clients in making the best financial decisions in the face of complexity, uncertainty, as well as many behavioural biases.

Oxford Risk’s behavioural tools assess financial personality and preferences as well as
changes in investors’ financial situations supplemented with other behavioural information and demographics to build a comprehensive profile. Oxford Risk’s financial personality tests can measure up to 20 distinct dimensions of which only 6 reflect preferences for ESG investing.

It believes the best investment solution for each investor needs to be anchored in stable and accurate measures of risk tolerance. Behavioural profiling then provides an opportunity for investors from all over the country to learn about their own attitudes, emotions, and biases, helping them prepare for the anxiety that is most likely to arise. This should be used to help several investors control their emotions, not define the suitable risk of the portfolio itself.

What did the Oxford Risk executive have to say?

Bianca Kent, Head of Client and Strategy, Australia at Oxford Risk commented: “Wealth managers from all over the country understandably rely on their intuition to some extent when assessing client risk suitability and recommending appropriate investments. However, there is clearly an issue with the systems and processes they use to support that intuition despite the apparent confidence that wealth managers express in their currently existing technology.”

“When the technology is still reliant on subjective judgements and is too cumbersome to
react quickly enough there is a need for improvements to enhance the service to clients.”


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