Oxford Risk: The Perks of Behavioural Engagement Technology

Oxford Risk, the specialists in technology solutions powered by behavioural finance, data science and quantitative finance, has released its latest whitepaper analysing how Behavioural Engagement Technology can understand, map and improve engagement in personal finance. 

Poor, emotionally driven decisions cost investors an average of 3% per year. However, by using Behavioural Engagement Technology, Oxford Risk says wealth managers, financial advisers and banks can engage investors to improve financial outcomes and grow assets under management by more than 10%.

But what is Behavioural Engagement Technology as it relates to investors, and how does it impact investment behaviour? For Oxford Risk, it means combining suitability assessments with a deep investor behavioural analysis, to enable hyper-personalised services and boost customer engagement by sending the right messages to the right people at the right time.

Bringing together behavioural finance, data science and AI, the technology can support several case studies, such as pinpointing the clients most likely to offer word-of-mouth recommendations, to the groups that need additional support during periods of volatility and those that need help deploying uninvested cash surpluses.

The ‘cost of being human’ 

This is how Behavioural Engagement Technology corrects human error in investment decisions. 

Greg Davies, Head of Behavioural Science at Oxford Risk, says: “The winners in financial services are likely to be those who best engage with their clients and help them to achieve better outcomes. 

“Behavioural finance, data science and AI technology together form an exciting combination to help this happen at a greater scale, and with more personalisation, than ever before. Behavioural Engagement Technology can help us all make better financial decisions.”

It is in this way Behavioural Engagement Technology helps mitigate the cost of being human, particularly when it comes to investment inaction.

For example, an investor that develops a moderate risk tolerance in a globally diverse multi-asset-class ‘optimal’ portfolio  – thanks to Behavioural Engagement Technology  – can expect excess returns over cash of around 4-5% per year.

So, even though choosing not to invest can help investors sleep soundly at night, this can come at a cost long-term.

Davies continues: “Investing badly is due to poor engagement. This points to a conundrum: isolated tactics to just get investors merely more engaged will only take us so far… and at some point could even backfire.

“Appropriately engaged investors are all alike, but each badly engaged investor struggles in their own individual way, trying to work out what to do, for every investor, every time – to reliably capture more of those lost returns – is impossible without technology.”

The perks of Behavioural Engagement Technology 

Leveraging Behavioural Engagement Technology can, therefore, provide insights for investors to find the ‘sweet spot’ in their engagements. 

But, of course, this sweet spot is different for every investor, and Oxford Risk’s Behavioural Engagement Technology platform can help deliver hyper-personalised, bespoke tools to deliver the most effective investment engagement individually.

Davies adds: “It’s important to start from the understanding that there is no universally ‘best’ engagement protocol. What works for an individual investor is heavily and inescapably dependent upon a complex web of contextual moving parts.

“In designing and deploying engagement strategies, it pays to understand the limits of humans to reliably account for these moving parts and to use tech to overcome them. To understand what both sparks interest and serves interests. Not least because what engages an investor right now can be at odds with what keeps them engaged over an investment journey.”

Of course, what drives an investor’s behaviour is complex and ever-changing, but Oxford Risk has defined four key investment traits from which to define an individual’s habits. 

Behavioural Engagement Technology ripe for continuous refinement

Much like the behavioural profile of investors is ever-changing, so too is the technology that drives actionable insights and support for investor decision-making. 

As AI and machine learning continue to evolve with increased rapidity, the types of engagement that are most effective for an individual's personality signature will continue to improve.

The scope for Behavioural Engagement Technology to become more fine-tuned and increasingly effective and accurate is an exciting prospect, and Oxford Risk hopes to be at the cutting edge of this innovative technology deep into the future. 

Davies concludes: “The understanding of investor engagement is ripe for additional research, refinement, and the use of AI and machine learning to continually fine-tune which different types of engagement are most effective for each individual personality signature. Oxford Risk’s Behavioural Engagement Technology is leading the way.”

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