Perception A: Wealth managers are overly reliant on intuition and client self-assessment

Perception A: Wealth managers are overly reliant on intuition and client self-assessment

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Algemeen (13) rapportage

European wealth managers are relying too much on their own intuition and clients’ own self-assessment of their suitable risk level, according to a new study from behavioural finance experts, Oxford Risk.

Its study with wealth managers across France, Germany, Netherlands, Spain, Italy, Switzerland, and the Nordics found three out of four (75%) wealth managers admit they largely rely on clients to tell them what their suitable risk level is. Around one in five (22%) say they strongly agree that they rely largely on client self-assessment when it comes to setting risk levels.

Advisers are often also basing decisions on their own intuition. Around seven in ten (71%) wealth managers say they rely on intuition to assess an investor’s suitable risk level. Around a third (34%) strongly agree that they do this, the research by Oxford Risk, which builds behavioural risk suitability software to help wealth managers support clients, found.

Oxford Risk’s study with wealth managers whose firms collectively manage assets of around €4 trillion found the majority (91%) have a systematic method to combine the different elements that go into establishing a client’s suitable risk level.

However, when asked to rank the most important elements of assessing a client’s suitable risk level, only just over one in four (28%) rank an investor’s self-assessment as very important. Instead, almost half (47%) say that investors’ psychological willingness to take on risk is the most important factor, followed by an investor’s composure (40%) and an investor’s wealth and cashflow (40%). Just 6% say that age is important when assessing a client’s suitable risk level.