Wealth Managers Believe Client Risk Assessments Must Improve

Wealth Managers Believe Client Risk Assessments Must Improve

Wealth managers in the middle east, and North Africa (MENA) believe risk assessment for clients should improve with just one in three (31%) rating the current service as excellent, new research for behavioural finance experts Oxford Risk shows. 

Its study with independent financial advisers and wealth managers in MENA who collectively manage assets of around $290 billion, found strong demand for more technology to improve the service.

Almost all (96%) contacted in the research with wealth managers in the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Oman, Egypt, and Kuwait,  believe the use of technology in assessing client suitability, risk tolerance and asset allocation will expand in the next three years.

More than half (54%) expect a dramatic increase in the use of technology as the asset management industry in the region grows. Around 69% of wealth managers believe it will hit $2 trillion assets under management before 2025 compared with the $1.2 trillion achieved in 2020.

The research found strong support for the work by regulators across MENA in driving better skills and professionalism which are helping to ensure that advisers can assess what clients need driven by a more formalised assessment of their risk profiles and goals.

More than half (54%) of advisers questioned expect the trend to increase dramatically over the next five years while 41% expect a slight increase.

Greg B Davies, Head of Behavioural Finance, Oxford Risk said: “Wealth managers across MENA are focused on improving their service to clients and increasing their skills.

“It is interesting to see that just one in three describe the ability of wealth managers in the region to understand the suitable risk level of clients as excellent. By increasing their use of technology and algorithms to help deliver more consistent support to clients they can avoid issues over assessments of risk tolerance and asset allocation.

“Once a specific framework for the measurement of risk tolerance, risk capacity and other relevant factors is established it can be run at scale and speed.”

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 18 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. #Wealth Managers Believe Client Risk Assessments Must Improve