Wealth managers in the MENA region are expecting strong growth in the number of robo advisers and digital only wealth managers, new research for behavioural finance experts Oxford Risk shows.
Its study with independent financial advisers and wealth managers in MENA who collectively manage assets of around $290 billion, found one in three (34%) expect the number of digital-only solutions to increase dramatically by 2025.
Another 45% expect a slight increase in the number of robo advice and digital-only solutions while 21% expect no change, the research with wealth managers in the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Oman, Egypt, and Kuwait found.
The forecasts of expansion build on the impact of the COVID-19 pandemic in terms of on the adoption of technology across the region with lockdowns and restrictions forcing companies to find new ways of working.
More than two out of three (68%) of wealth managers questioned said the pandemic has accelerated the technology revolution in the MENA wealth management sector. However, one in eight (12%) disagree that the pandemic has had an effect.
Oxford Risk is urging wealth advisers in the region to make more use of technology to provide improved services to clients based around understanding their needs through detailed profiling.
Greg B Davies, PhD, Head of Behavioural Finance, Oxford Risk said:
“The increased use of technology is transforming businesses around the world and is clearly having a major impact in the MENA region.
“The rise of digital only solutions is to be expected as the technology revolution speeds up in the MENA wealth management sector. There are major benefits for wealth managers and clients from increasing their use of technology and algorithms.
“That will help deliver more consistent support to clients and avoid issues over assessments of risk tolerance and asset allocation. Once a specific framework for the measurement of risk tolerance, risk capacity and other relevant factors is established it can be run at scale and speed.”
Oxford Risk’s behavioural tools assess financial personality and preferences as well as changes in investors’ financial situations and, supplemented with other behavioural information and demographics, build a comprehensive profile. Oxford Risk’s financial personality tests can measure up to 18 distinct dimensions, of which six reflect preferences for ESG investing.
It believes the best investment solution for each investor needs to be anchored on stable and accurate measures of risk tolerance. Behavioural profiling then provides an opportunity for investors to learn about their own attitudes, emotions, and biases, helping them prepare for the 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.
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