Wealth managers and financial advisers are losing out on business by failing to contact family members who’ve received major inheritances from their clients, new research(1) from behavioural finance experts Oxford Risk shows.
And the research shows that even when they do contact the person who has had the windfall, advisers are failing to convince them that they need support with managing their inheritance.
The study with regular retail investors found 37% who had received major inheritance pay-outs in the past 10 years were not contacted by the adviser or wealth manager who worked with their family.
More than a third (35%) who were contacted by the financial adviser decided not to work with them highlighting a major loss of potential business for wealth managers.
Oxford Risk is urging wealth advisers to make better use of technology to provide improved services to clients based on understanding their needs through detailed profiling.
It builds software to help wealth managers, banks, and financial advice firms support their clients in making the best financial decisions in the face of complexity, uncertainty, and behavioural biases. It has developed proprietary algorithms which hyper-personalises the selection of products, communications, and interventions that resonate most with each client at a particular time.
Greg B Davies, PhD, Head of Behavioural Finance, Oxford Risk said: “Wealth managers cannot convince all potential clients that they need their services, but clearly they should be at least contacting family members of clients who might value support after receiving a major inheritance.
Wealth managers and advisers that can offer more personalised communications experience a higher prospect-to-client conversion rate. Leveraging the latest technology to
better understand clients’ financial personality and circumstances can help advisers and wealth managers address all clients in the ways that most resonate with them.”
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 20 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.