Four out of five say improved client behavioural technology gives a competitive advantage

Wealth manager spending on technology to improve understanding of clients’ behavioural needs when investing is set to grow strongly over the next five years, new European research* from behavioural finance experts Oxford Risk shows.

Its study with wealth managers across Europe who collectively manage assets of around €327 billion, found 77% predict increased investment in financial personality technology with around 13% forecasting a substantial increase in spending by companies.

Astoundingly, almost half of wealth managers surveyed (49%) still claim to rely mainly on their own intuition to assess their clients’ psychology. And more than half (57%) felt like they had a very good understanding of their clients’ financial personality when it comes to investments.

Oxford Risk’s research with wealth managers in the UK, France, Italy, Spain, and Ireland found strong support for the increased use of technology to develop better client financial personality understanding.

Around 80% of those questioned said improved technology to better understand clients’ financial personality is a way to gain a competitive advantage and win more business.

Up to four out of five (79%) say improvements in technology mean advisers have an opportunity to enhance how they assess clients’ behavioural needs and deliver a better service.

Oxford Risk is urging wealth managers to make better use of available technology to provide improved services to clients based on understanding their needs through detailed financial personality assessments and behavioural science. 

Greg B Davies, PhD, Head of Behavioural Finance, Oxford Risk said: “Technology and digitalisation have accelerated across all sectors and industries and to some extent, it can be argued that wealth managers have been slow to catch up.

“However, the research indicates that they are starting to wake up to the benefits of rapidly expanding investments in technology for assessing clients’ behavioural needs, with most convinced that they have a large part to play in the future.

“How they use the technology is another matter, however. Blending technology and behavioural science enables a comprehensive approach to suitability that recognises the complexity of each client and their emotional needs over time. It can’t just be a tick box exercise.”

Oxford Risk, which 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, and behavioural biases, has developed proprietary algorithms which rank products, communications, and interventions for their suitability for each client at a particular time.

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

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

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