Behavioural finance experts Oxford Risk has reported its client base of wealth managers and other investment management companies has nearly doubled over the past 12 months. It now serves over 100 clients in the UK, Europe, South Africa, Asia, and Australia, who collectively have more than USD1trillion in assets under management.
Oxford Risk says its strong growth has been fuelled by the digitisation of investment advice which accelerated during the Coronavirus crisis; the need to provide greater assistance to increasingly time-pressured advisers; and a growing focus on more in-depth profiling of clients for improved engagement. This is being driven by new regulation, but also the increasing desire by wealth managers and investment providers to offer more personalised recommendations to clients.
The rising allocation to cash by many retail investors during the crisis has also seen more institutions turn to Oxford Risk to develop more effective guidance to investors helping them overcome the emotional discomfort of investments.
Oxford Risk helps investors achieve better outcomes by embedding behavioural finance in the institutions that serve them and incorporating the impact of investors’ emotions on their investing decisions. It does this in three ways:
• It supports accurate assessment of investors’ ‘financial personality’, ESG preferences, financial circumstances, and goals
• Its technology helps with matching suitable investment products and portfolio solutions to investor risk profiles, as well as financial and social preferences and attitudes
• Its solutions support advisers in providing clients with hyper-personalised advice, nudges, and communications, driven by investors’ unique profiles
James Pereira-Stubbs, CCO, Oxford Risk says: “Our clients come to us because they have recognised that every investor has an emotional side and that truly effective advice needs to take that into account. We have built an award-winning team of behavioural scientists, quant finance experts, wealth management veterans, and technologists to do exactly that. Our proposition has never been stronger we can deploy a consistent solution for face-to-face advice, digital and hybrid channels from retail to HNW clients.”
Greg B Davies, PhD, Head of Behavioural Finance Oxford Risk says: “The wealth management sector is very much focused on reducing product fees and becoming more competitive, but many need to pay greater attention to helping address the 300bps we estimate the average retail investor loses in a year because of emotional decision making. Our solutions help wealth managers to do this, and ultimately provide more bespoke recommendations to clients and a better service.”
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, builds a comprehensive profile. Oxford Risk’s financial personality tests can measure up to 18 distinct dimensions.
Oxford Risk believes the best investment solution 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.