A UK-based behavioural finance firm says its business has surged over the past year as interest in this approach to managing money gains momentum, fuelled by developments such as big swings in markets.  

London-based behavioural finance fintech Oxford Risk, which supports a range of wealth managers and other investment management companies, has reported strong growth in the UK.

The firm’s UK-focused revenue has almost doubled in the past 12 months it said, and it now supports over 120 clients in the UK compared with 80 a year ago. The combined AuM of its UK clients is now more than £1 trillion ($1.3 trillion) and it works for most of the country’s largest wealth managers. 

Behavioural risk applies to understanding how people mistake portfolio gains for pure skill rather than also accept the role of chance, or treat losses more emotionally than they do with gains, and follow crowd behaviour. These insights draw on views about how humans have evolved from pre-history, and are used to explain events such as stock market booms and busts, or share trading frenzies such as the GameStop affair in the US more than a year ago, or the regular gyrations of bitcoin. The pandemic, Russia’s invasion of Ukraine and the spike in energy prices have given plenty of reasons for emotions to hold sway in markets. 

Oxford Risk said that its growth has been fuelled by a range of factors including new regulation such as the FCA Consumer Duty rules which demand a better understanding of an investor’s behavioural biases.

It has also benefited from the ongoing digitisation of investment advice, both as a hybrid and standalone offering as well as the growing desire by wealth managers to develop their understanding of clients beyond investment goals and risk tolerance levels so that they can enhance their propositions. In addition, retail investors are becoming more demanding in terms of the service and transparency they want from their wealth managers with technology playing a key role in delivering this.

Oxford Risk said it helps investors achieve better outcomes by embedding behavioural finance in the institutions that serve them and  incorporating the effect of investors’ emotions on their investing decisions. It supports accurate assessment of investors' "financial personality," ESG preferences, financial circumstances, goals, and time horizons. Its technology helps match suitable investment products and portfolio solutions to investor risk profiles, as well as financial and social preferences and attitudes. Its solutions support advisors to provide clients with hyper-personalised advice, nudges, and communications, driven by investors’ unique profiles to help investors achieve better outcomes.

“The UK is an essential market for us and one in which the market participants have a critical role to play in closing the advice gap. At Oxford Risk, we provide our clients with peace of mind and help them to grow and retain assets by ensuring investors are more engaged. The UK investment management sector is intensely competitive with increasing levels of generational wealth transfer and our solutions are equally applicable to established institutions as well as new emerging disruptors," James Pereira-Stubbs, chief client officer at Oxford Risk, said.

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Greg B Davies, PhD, head of behavioural finance Oxford Risk, added: “The investment advice and guidance sector should be focused on providing the best service in the most cost-effective way. As a team of behavioural scientists, quant finance experts, wealth management veterans, and technologists, we have been able to build a unique proposition that enables them to meet these objectives. We ground our technology in decades of academic research, delivering insights and outputs that our clients can more easily deploy. We not only help understand the right answer for investors but also increasingly help them with the emotional comfort they need to act on it.”

Oxford Risk’s behavioural tools analyse investors’ financial personalities and preferences as well as changes in their financial circumstances which, supplemented with other behavioural information and demographics, enables them to build the most comprehensive picture of client suitability.

The company, which builds software to help wealth managers and other financial services companies assist their clients in making the best financial decisions in the face of complexity, uncertainty, and behavioural biases, has developed proprietary algorithms which rank products, communications, and interventions for their suitability for each client at a particular time.

It believes the best investment solution for each investor needs to be anchored on stable and accurate measures of Risk Tolerance. Behavioural assessments then provide an opportunity for investors to learn about their own attitudes, emotions, and biases, helping them prepare for any potential 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.

Founded in 2002 by behavioural scientists from Oxford University, Oxford Risk use behavioural finance software to help investors make better decisions. Advisors, banks, wealth managers, pension providers, and financial institutions embed Oxford Risk's software solutions to help guide investors to higher returns and enjoy greater client engagement, asset growth, and regulatory peace of mind. See another article about the firm here.