Oxford Risk: 1 in 4 wealth managers spend less than 40 min establishing clients' sustainability preferences
Oxford Risk: 1 in 4 wealth managers spend less than 40 min establishing clients' sustainability preferences
A new study from behavioural finance experts, Oxford Risk reveals that one in four (24%) European wealth managers are only spending 40 minutes or less to establish the sustainability (ESG) preferences of new investment clients, despite agreeing that this is one of the most important tasks.
Its study with wealth managers across France, Germany, Netherlands, Spain, Italy, Switzerland, and the Nordics found over half (58%) say they take between 41 and 60 minutes to establish the sustainability (ESG) preferences of individual clients. Around 13% say they take between 61 and 90 minutes and four percent spend more than 90 minutes.
Around 90% of European wealth managers agree establishing sustainability preferences is one of the most important tasks when onboarding a new client, 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 too often these sustainability assessments and processes aren’t providing insightful or detailed enough information to base future decisions on. Only one in four (25%) wealth managers say they are very confident in identifying the portion of a client’s investments that should be allocated to ESG investing after using their current processes. One in ten (10%) are unsure about whether they could identify what should be allocated to sustainable investing after the process.
Just around a third (32%) say they are very confident in being able to identify the portion of a portfolio that should be allocated to article 8 and article 9 funds within an investor’s portfolio after using their current process. More than one in eight (13%) don't know whether they’d be able to do this or not using their current process.
James Pereira-Stubbs, Chief Client Officer, Oxford Risk said: 'Wealth managers are increasingly squeezed for time – they are expected to take on more clients as well as deliver more value to current ones. Having a detailed knowledge and insight into clients’ sustainability preferences is no longer a ‘nice to have’, it’s an essential part of being able to make the best investment decisions. It is important to ensure that clients and advisers are still getting high-quality, accurate information on which future decisions can confidently be made. Firms must ensure they have the right tools and software available for their wealth managers to achieve both speed and accuracy when establishing the sustainability preferences of clients. Using Oxford Risk to determine the sustainability preferences of an investor, not only provides regulatory peace of mind but also 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.