Risk profiling becoming a ‘box-ticking exercise’, Oxford Risk warns

Too many wealth advisers view risk profiling as an “unnecessary box-ticking exercise” which is leading to poor client outcomes, according to research by Oxford Risk.

The behavioural finance expert suggested that risk profiling is essential to providing good advice and ensuring regulatory compliance, but warned the profiling field is rife with misunderstanding and poorly designed assessment tools.

Advisers confuse clients’ tolerance of long-term risks “far too often” with the unstable attitudes they display in response to short-term events, such as market corrections over time, the group stated.

Oxford Risk builds software to help wealth managers and other financial services companies assist their clients in making financial decisions in the face of complexity, uncertainty, and behavioural biases.

However, the group said that many wealth managers and financial advisers are “poorly equipped” to help clients deal with the emotional and psychological effects their clients have endured during the COVID-19 crisis, and the impact it has had on markets and their investments.

Oxford Risk head of behavioural finance, Greg Davies, commented: “By conflating long-term risk tolerance with short-term emotional risk attitudes, advisers will potentially replicate all the silly things that investors do already, rather than helping to control investors’ more destructive tendencies.

“This is exacerbated by the ill-advised trend of using ‘revealed preferences’ and gimmicky ‘games’ to determine risk tolerance. Such over-engineered and unstable approaches to measuring risk tolerance are inappropriate and do not reflect clients’ actual willingness to take long-term risk. Measuring the wrong thing is worse than not measuring at all.”

    Share Story:

Recent Stories


FREE E-NEWS SIGN UP

Subscribe to our newsletter to receive breaking news and other industry announcements by email.

  Please tick here to confirm you are happy to receive third party promotions from carefully selected partners.


NEW BUILD IN FOCUS - NEW EPISODE OF THE MORTGAGE INSIDER PODCAST, OUT NOW
Figures from the National House-Building Council saw Q1 2025 register a 36% increase in new homes built across the UK compared with the same period last year, representing a striking development for the first-time buyer market. But with the higher cost of building, ongoing planning challenges and new and changing regulations, how sustainable is this growth? And what does it mean for brokers?

The role of the bridging market and technology usage in the industry
Content editor, Dan McGrath, sat down with chief operating officer at Black & White Bridging, Damien Druce, and head of development finance at Empire Global Finance, Pete Williams, to explore the role of the bridging sector, the role of AI across the industry and how the property market has fared in the Labour Government’s first year in office.


Does the North-South divide still exist in the UK housing market?
What do the most expensive parts of the country reveal about shifting demand? And why is the Manchester housing market now outperforming many southern counterparts?



In this episode of the Barclays Mortgage Insider Podcast, host Phil Spencer is joined by Lucian Cook, Head of Research at Savills, and Ross Jones, founder of Home Financial and Evolve Commercial Finance, to explore how regional trends are redefining the UK housing, mortgage and buy-to-let markets.

The new episode of The Mortgage Insider podcast, out now
Regional housing markets now matter more than ever. While London and the Southeast still tend to dominate the headlines from a house price and affordability perspective, much of the growth in rental yields and buyer demand is coming from other parts of the UK.

In this episode of the Barclays Mortgage Insider Podcast, host Phil Spencer is joined by Lucian Cook, Head of Research at Savills, and Ross Jones, founder of Home Financial and Evolve Commercial Finance.