If you are running a hotel, you do not know which message will work best for the couple that has just checked in to room 312 (let alone which will work best for each half of the couple), so you go with the one that did best on average and apply it to everyone, knowing that sometimes it will not work as well as an alternative, or could even backfire.
Financial advice is different. Because to a large extent, for a wide range of common contexts, using sophisticated financial personality profiling tools, you can know how the messages you send are likely to be received by individual clients.
Knowing this, you can more easily and reliably, with personalised interventions, equip your clients with the emotional comfort they are seeking when they sit on surplus cash, and therefore provide it at a fraction of the cost.
And, soon, you may be able to do this not only at scale, but with real-time adviser-to-client translation.
Understanding financial personalities is the key to personalised advice
Managing moving financial and emotional parts benefits from blending the best qualities of both human and tech. Technology is great for sifting through data and crunching numbers. Humans are better at knowing what to bother sifting and crunching in the first place, and interpreting the results of doing so.
Well-designed digital platforms can deliver hyper-personalised, easy-to-use, and self-refining recommendations to clients, and embed effective interventions tailored to each investor into their ongoing investment journey.
The first step in doing this is understanding each investor through the lens of the complex web of personality, preferences, and circumstances that expresses and shapes their investing experience.
The best way to do this is with a series of simple (albeit thoroughly researched and tested) psychometric financial-personality assessments.
At Oxford Risk, we have identified more than 20 dimensions that help enhance investor understanding, and which we can reliably test for in a way that stays valid across countries, cultures, and prevailing market conditions.
For example, the behavioural buttons that are most effective in getting a composed investor to put their surplus cash into the markets are very different from those you would push for an anxious investor.
Similarly, impulsive investors respond to different triggers than slow movers; and those with high sustainability preferences to different narratives than those more narrowly focused on their financial goals.
Every dimension allows us to fine-tune how we help bring investors over the emotional barriers to their own financial success.
To see what this could look like, consider two clients, Amy and Bob. They are the same age. They live in the same town, with the same size and age of families. They do the same job, and have the same career prospects. They own the same assets, have the same goals, and the same risk tolerance. Yet the best advice for each of them could be very different.
