Behavioural finance experts Oxford Risk have found that European wealth managers highlight impulsive decisions as the most common mistake made by clients with their investment portfolios.
It surveyed around 150 wealth managers across Europe and asked them to identify the top three mistakes they see clients make.
The most common error wealth managers questioned in the UK, France, Italy, Spain, and Ireland see is clients making impulsive decisions to the detriment of their long-term plans.
Some 41% identified impulsive decision-making as one of the top three mistakes, followed by evaluating returns over too short a time period (33%), and over-confidence (30%).
The table below shows the most common mistakes that wealth managers believe clients make.
| Most common mistakes made by clients | Number of wealth managers listing the mistakes in their top three |
| Making impulsive decisions to the detriment of their long-term plan | 41% |
| Evaluating returns over too short a time | 33% |
| Over-confidence | 30% |
| Comparing their returns to other investors | 29% |
| Under-diversification | 28% |
| Buying high, selling low | 28% |
| Lacking the composure to handle market volatility | 23% |
| Holding on to losing positions too long | 23% |
| Over reliance on familiar investments | 21% |
| Home bias in their portfolios | 21% |
| Holding too much cash for too long | 21% |
Greg Davies, head of behavioural finance at Oxford Risk, said: “An adviser can devise an excellent investment strategy; indeed, it could be the ‘perfect’ portfolio for the individual in theory. Yet, if the person can’t stick to the plan or feels anxious while doing so, then sub-optimal behaviours leading to sub-optimal outcomes are the likely result.
“The right investing decisions are not about financial circumstances alone, but financial personality too, and we ignore that at our peril. Emotions and personality are at the root of most of the common mistakes wealth managers see and need to be factored into how advisers support their clients.”
