Thursday,30 May 2024

Oxford Risk’s Pereira-Stubbs: “Emotional comfort in investing influences financial decisions”

5 min read

James Pereira-Stubbs, chief client officer at Oxford Risk, discussed the impact of behavioural finance, a domain where technology, psychology and finance intersect on investment advisory

Oxford Risks, a spin-off of University of Oxford, was founded by three professors who developed an assessment framework for understanding how an individual’s financial personality, in addition to risk tolerance, drives investment decisions. Pereira-Stubbs said: “What they came up with was a fairly robust assessment to understand someone’s need for emotional comfort and risk tolerance—how do I feel about risk in the long term?”

Addressing the impact of emotional decision-making in investment, particularly in volatile markets, Pereira-Stubbs explained: “Investors lose 300 basis points on average, because of their need for emotional comfort.”

In times of heightened volatility, the tendency of investors to either convert their portfolios to cash or to cease investing altogether exacerbates the problem. This behaviour, driven by discomfort, ultimately hinders their ability to achieve financial goals. Pereira-Stubbs underscored the necessity of providing tailored comfort to investors, respecting their unique financial personalities and needs. This approach is crucial, as he puts it, “to give people that comfort. And people are very different—people have different personalities, and because of that, the emotional comfort that the relationship manager has to develop with the client needs to be tailored.”

This statement reflects the core philosophy of Oxford Risk in balancing emotional well-being with financial decision-making, underscoring the nuanced approach required in modern financial advisory. This, he explained, can be aided and enhanced by artificial intelligence and machine learning. Being able to personalise the approach to clients drives between 2-6X more engagement and 10% plus organic growth.

Keywords: Emotional Comfort, Investing, Financial Decisions, Behavioural Finance, Technology, Psychology, Investment Advisory, Risk Tolerance, Assessment Framework, Financial Personality, Volatile Markets, Portfolio, Cash, Financial Goals, Tailored Comfort, Relationship Manager, Artificial Intelligence, Machine Learning, Personalised Approach, Engagement, Organic Growth
Institutions: Oxford Risk, University Of Oxford
People : James Pereira-Stubbs
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