Wealth managers’ tech spend to surge

Patrick Bunsci

17 April 2023

Nearly 70% of wealth managers believe their existing technology systems are too cumbersome to effectively assess client portfolio suitability and rapidly adapt to changing business and investment circumstances, a recent global study by WealthTech developer Oxford Risk has revealed.

Further, around one in seven (14%) surveyed wealth managers strongly agreed that their existing systems remain ill-suited to their needs.

The survey found widespread dissatisfaction with existing suitability assessments, exposed during recent global financial shocks, including fallout from the Covid-19 pandemic, as well as ongoing economic volatility coupled with rising inflation and interest rates.

A significant majority (66%) of surveyed wealth managers also admitted that their existing systems are too subjective and reliant on human judgement and biases when making assessments.

Portfolio suitability refers to investments that are appropriately tailored by wealth managers to an investor’s risk appetite and personal circumstances.

The study, which surveyed 300 wealth managers across Australia and New Zealand as well as the UK, France, Italy, Spain, Ireland who collectively manage assets of around AU$920 billion (€565 billion), found nearly four out of five (78%) expect global spending on technology by the wealth sector, specifically to help assess portfolio suitability, will increase over the next five years.

Significantly, many of those surveyed believe that increasing their tech spend will deliver a competitive edge for their business, as well as increase potential new business opportunities.

Around 81% believe technology will make them more appealing to potential clients, with one in five (20%) strong supporters of winning clients through technology.

Greg B Davies, Oxford Risk’s head of behavioural finance, noted that while wealth managers “have often been slow to adopt technology”, the sector has increasing recognised its key role in addressing portfolio suitability.

“It is worrying when wealth managers themselves admit that their processes and systems are flawed, but good that they recognise the issues,” Davies said.

“Clearly the last three years have been challenging, and suitability processes have felt the strain with some being exposed as simply not up to scratch.

“Cumbersome tools and annual review processes were often inadequate to respond to rapidly changing client circumstances. Life changes fast; tools should reflect this.”

Founded in 2002 by decision science academics from Oxford University, Oxford Risk is a UK-based wealth management software developer specialising in behavioural assessment tools.