Wealth managers admit they are regularly surprised by their clients’ investment decisions despite claiming to have a very good understanding of their psychological profiles, behavioural finance experts Oxford Risk has revealed.
The survey of 150 wealth managers across Europe found that 68% admit that they are surprised by the decisions their clients make.
This is compared to just 8% who said they are never surprised by clients’ decisions.
Some 62% believe emotional decision-making costs the average investor over 100 basis points of investible wealth each year.
The survey also found 80% of wealth managers claim that they have a very good understanding of their clients’ psychological profiles when it comes to investments.
Some 82% said they have good tools and systems in place to understand their clients’ psychological profiles, compared to just 4% who don’t.
Just under three-quarters (74%) said they have sufficient training to understand their clients’ psychological profiles, and just 3% admit to not having this.
But when asked how they asses their clients’ psychological profiles, 67% rely mainly on their own intuition. Only 10% said they don’t do this.
Greg Davies, head of behavioural finance at Oxford Risk, said: “This research points to worrying trends among advisers who believe that they have the right training and tools in place to accurately measure their clients’ psychological profiles, yet the vast majority still admit to relying on their own intuition.
“Current methods used by many wealth managers clearly aren’t giving them the information they need and with many more only relying on their own intuition, there is a real danger of not just surprises but more serious financial implications in the future, which could have easily been avoided if a client’s psychological profile was truly understood.”