Perception A: Study reveals suitability tech can help wealth managers build client relationships

November 7, 2023

European wealth managers can free up time to spend building client relationships by switching to suitability technology when onboarding new clients, behavioural finance experts, Oxford Risk says.

Its study with wealth managers across France, Germany, Netherlands, Spain, Italy, Switzerland, and the Nordics found 92% spend more than 40 minutes establishing suitable risk levels for a new investment client. Around two-thirds (64%) say they take between 41 and 60 minutes, while (27%) say it takes between 61 and 90 minutes and 1% even longer.

Less than one in 10 (8%) say they spend 40 minutes or less, the research by Oxford Risk, which builds behavioural risk suitability software to help wealth managers support clients, shows.

The study with wealth managers whose firms collectively manage assets of around €4 trillion shows that when onboarding a new client, nearly all (92%) agree that determining their suitable risk level is one of the most important tasks. Around a third (31%) strongly agree with this.

Oxford Risk has seen revenues from clients in continental Europe increase by 300% in the past 12 months and says the main driver for growth is that many of the suitability assessments currently used fall short of European Securities and Markets Authority guidelines resulting in institutions needing to find better solutions.

Its study found that 90% of wealth managers agree establishing suitability is important from a compliance and regulatory aspect, with 30% strongly agreeing with the view. Around 85% agree it’s very important for building lasting client relationships, with 31% strongly agreeing with this.

James Pereira-Stubbs, Chief Client Officer, Oxford Risk said: “Wealth managers’ time is under increasing pressure, and they are having to find quicker and smarter ways to undertake all aspects of their role. That should apply to assessing suitability where wealth managers can do an incredibly robust and insightful assessment in less than 25 minutes if they have the right tools.

'That would free up valuable time for client engagement while meeting regulatory requirements. Given that this is one of the most important tasks to undertake when onboarding a new client, wealth managers must be absolutely confident in their assessment without the need to worry about compliance and regulatory risks further down the line. Using Oxford Risk to determine the suitable risk level of an investor, not only provides regulatory peace of mind but engages investors positively to grow and retain assets.'

Oxford Risk’s software supports wealth managers to assist their clients in making the best financial decisions in the face of complexity, uncertainty, and behavioural biases.

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 sustainable investing.

Oxford Risk 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.