Improved technology will be a competitive advantage, study shows.
Wealth managers in New Zealand are set to increase spending on technology to help them better understand client risk suitability assessments, new research* from behavioural finance experts Oxford Risk shows.
The study with wealth managers who collectively manage assets of around $144.5 billion, found nearly nine out of 10 (88%) are planning to boost spending over the next five years as they look for ways to enhance their service to clients.
Oxford Risk believes many wealth managers and financial advisers need better systems and tools to support clients particularly in the light of recent events such as the financial impact of COVID-19, rising inflation and high levels of volatility.
Its research found almost all advisers already think their current systems and processes deliver for clients – around 94% claim to have good tools and systems in place.
The study found wealth managers are generally good at understanding Risk Tolerance and tend to tailor communications to clients based on different needs.
Around 64% of advisers questioned described Risk Tolerance as a stable trait which doesn’t change. Just 16% questioned disagreed. Around 90% of wealth managers say they change communications for different types of clients.
Oxford Risk, which launched in New Zealand 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, and behavioural biases.
Bianca Kent, Head of Client and Strategy, New Zealand at Oxford Risk said: “Technology has a very important role to play in supporting wealth managers to better understand their clients’ risk suitability.
“It’s encouraging to see that the majority of wealth managers surveyed agree that Risk Tolerance is a stable trait which doesn’t change over time. The acknowledgement that using more sophisticated technology will be a competitive advantage will not only allow them to enhance their service to existing clients, but also win new ones, and that is driving increased spending in the sector over the next five years.”
Oxford Risk’s 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.
Notes
* Independent research company PureProfile interviewed 50 wealth managers in New Zealand responsible for $144,5 billion assets under management during January 2023
About Oxford Risk
Founded in 2002 by leading decision science academics from Oxford University, Oxford Risk are experts in behavioural finance and financial well-being. They understand how people perceive risk, make judgements about risk, and behave in risky situations. They know how best to elicit and convey information to ensure those perceptions, judgements, and behaviours reflect true intent.
Oxford Risk applies behavioural finance expertise and technology to help its clients deliver superior advice and service more efficiently.
Benefits of behavioural finance-based solutions:
Stronger Compliance
Produce more consistent and objective advice with a robust digital audit trail and future proof regulatory requirements.
Reduced Costs
Engaging digital delivery streamlines human decision processes, improves efficiency, and focuses human effort where it is most valuable.
Increased Revenue
