Risk profiling and behavioural-science specialist Oxford Risk has launched a new suite of scientifically validated end-to-end client suitability and behavioural-insight tools

Combining quant-finance techniques with decades of behavioural-science research, the new Compass technology aims to better understand investors, improve their financial decisions, and match them to suitable investments.

The comprehensive suitability suite helps advisers and investors to navigate investment complexity by accounting for an investor’s psychology, circumstances, emotions, and financial understanding.

The integrated elements of the Compass toolkit are:

  • the most scientifically rigorous psychometric risk-tolerance assessment available; combined with…
  • the industry’s only dynamic risk capacity calculation (a quantification of an investor’s financial circumstances) to create an investor’s long-term risk profile; set in the context of…
  • nine other behavioural insights to manage short-term emotional comfort; all of which are further refined by…
  • knowledge and experience assessment that not only measures, but also strengthens an investor’s understanding along their journey.

Together, the tools quantify what could only be guessed at before, removing the need to rely on subjective workarounds. Not only do they enhance client understanding, but also improve client engagement, ensure greater consistency of advice, and future-proof compliance processes.

Supporting client suitability

Suitability is inherently dynamic and requires tools that are sophisticated enough to aid investors in their search for both investment returns and emotional comfort.

Oxford Risk believes that suitability requires a robust set of tools that recognises the humanity of both advisers and investors and works with them, helping to improve decisions by applying the insights of behavioural science and making the most of supportive, expert technology.

Greg Davies, who joined Oxford Risk after a decade as Head of Behavioural and Quant Finance at Barclays Wealth, designed the integrated suite of tools. He said: “Compass moves beyond a narrow view of what it means to own a good investment portfolio, to a wider view of what it means to be a good investor. Just as it would be remiss to prescribe medical care without considering their lifestyle and goals, it is remiss when giving financial advice to focus on investment solutions without giving the same attention to the psychology and emotional comfort of the investor.”

“Good investment outcomes require managing the investor, not just managing investments.”

Oxford Risk CEO, Marcus Quierin, brought in at the same time to manage the step up in suitability services, added: “A suitability approach that pays proper scientific attention to each investor’s unique circumstances and the behaviours they employ in the search for emotional comfort, is long overdue.”

“I’m pleased to be able to announce that we’re launching a full set of tools to do just this, and moreover one that is designed to be built into an adviser’s existing systems and not bolted on. We see suitability as a chance to provide a supporting structure within which advisers can operate better, rather than obstacles that get in their way.”