In addition, 22% of wealth managers say they strongly agree that they rely largely on client self-assessment when it comes to setting risk levels.
Also, advisers are often basing decisions on their own intuition as 71% of wealth managers say they rely on it to asses an investor’s suitable risk level. 34% strongly agreed that they do this.
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However, when asked to rank the most important elements of assessing a client’s suitable risk level, only 28% ranked an investor’s self-assessment as very important.
Almost half (47%) stated that an investor’s psychological willingness to take on risk is the most important factor followed by an investor’s composure (40%). Next was an investor’s wealth and cashflow (40%).
Only 6% responded that age was important for a wealth manager when assessing a client’s suitable risk level.
This is according to behaviourial finance firm Oxford Risk and its survey of wealth managers across France, Germany, Netherlands, Spain, Italy, Switzerland and the Nordics.
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By GlobalDataJames Pereira-Stubbs, chief client officer, Oxford Risk said: “European wealth managers are being overly reliant on their own intuition and clients’ self-assessment when it comes to determining clients’ suitable risk level. This is despite them being aware that self-assessment isn’t the most important factor and instead, there are a large number of different aspects that need to be considered to accurately assess clients’ suitable risk level.
“If wealth managers do not have good tools, they tend to measure the wrong elements when making assessments which can mean companies fail to offer a consistent service to clients. Using Oxford Risk to determine the suitable risk level of an investor, not only provides regulatory peace of mind but also engages investors positively to grow and retain assets.”
