Wealth managers have admitted their suitability systems and processes for assessing client portfolios are not up to scratch for the task, research from behavioural finance experts Oxford Risk shows.
It surveyed 150 wealth managers in the UK, France, Italy, Spain, and Ireland, and found 65% believe that their current systems are too reliant on subjective human judgement.
Just 5% said there was not too much subjectivity, while 30% were neutral on the issue.
The advisers questioned criticised existing suitability processes and systems for being too cumbersome in responding to rapid changes in clients’ circumstances – 64% said systems do not adapt quickly enough.
Some 7% believe current systems can react quickly to changes in client circumstances, while 29% were neutral on the issue.’
‘Advisers deserve better tools’
Greg Davies, head of behavioural finance at Oxford Risk, said: “It is damning when wealth managers themselves admit that their suitability processes and systems are not suitable for the task.
“Clearly the last three years have been challenging with the pandemic and ongoing investment market volatility coupled with rising inflation and interest rates. Suitability processes might have felt the strain, and some may simply not be up to the task. Nevertheless, advisers deserve better tools that can withstand the rigours of modern life.
“Many detailed and time-intensive cash flow modelling tools are too front-heavy, used at the start of the relationship, but then frequently ignored in cursory annual reviews.
“At the start of the coronavirus pandemic, the financial circumstances of all advised clients changed substantially over a period of weeks. Cumbersome tools and annual review processes were inadequate to respond. Life changes fast; tools should reflect this.
“It is encouraging that wealth managers recognise there is an issue with their systems, but it will be more encouraging to see how they address the issue given that there are solutions available.”
