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Wealth managers urged to adapt investment technology to the investment journey


Wealth managers need to adapt behavioural science techniques to boost client engagement and enhance client profiling to improve the investment journey, according to behavioural finance experts Oxford Risk.

It warns that advisers and wealth managers are not making full use of technology which could be harnessed to deliver a powerful approach to suitability and engagement while providing hyper-personalised and self-refining recommendations.

Blending technology and behavioural science enables a comprehensive approach to suitability that recognises the complexity of each client and their emotional needs over time.

Greg B Davies, PhD, Head of Behavioural Finance, Oxford Risk, says: “Where it’s used in client engagement efforts at all, technology tends to focus on the administrative aspects of advisers learning about their clients, while treating those clients as robots.

“Selecting good investments is important but achieving good investment outcomes is more so. Emotional responses to the investment journey mean the calm person who sets the course is often different to the stressed one who will have to stick with the journey.”

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 to target products, communications, and interventions for each individual client at a particular time.

Behavioural tools assess investors’ financial personality and preferences, as well as changes in financial situation, which, supplemented with other behavioural information and demographics builds a comprehensive profile. Oxford Risk’s financial personality assessment examines 15 distinct dimensions, each of which has specific implications of what to do differently depending on whether an investor is high or low on that aspect of personality. Based on that deep understanding individual investors can be matched to investment solutions tailored to their unique needs and personality.

Greg B Davies adds: “Investment is a journey. Investment tech needs to come along for the whole ride.

“Our research has conclusively demonstrated that we can measure investors’ financial personality with simple but well-constructed questionnaires that are quick and easy to use, stable and empirically validated, and which add substantial depth to client profiles.”

The financial personality tests do not need to be answered at a single point in time but can be spread over the course of the client relationship removing the need for an onerous upfront profiling process and replacing it with an ongoing dialogue.

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