Clients increase their risk appetite as investment goals are hampered by volatile markets, says new study

• Almost all (97%) of wealth managers and financial advisors say their clients’ investment goals and objectives have been adversely affected by recent market volatility
• Seven in 10 (69%) say the risk profile of their clients’ investments has increased in the past 12 months and over eight in 10 (82%) predict clients will further increase their risk profile in the next 12 months
• Almost all (97%) think that the industry is effective at monitoring clients’ investment goals, objectives and risk profiles as required by ‘Know Your Client’ regulations

Clients of wealth managers, portfolio managers, financial advisors and financial planners have already increased their risk appetite or will do so in the next 12 months as their investment goals and objectives have been adversely affected by recent volatile markets, according to new global research* from Ortec Finance, the leading global provider of risk and return management solutions for professional investors.

The global study among wealth managers and financial advisors whose organizations collectively manage approximately $750 billion, found almost all (97% of survey respondents) of their clients have had their investment goals and objectives adversely affected by recent market volatility. One fifth (20%) say this has caused their clients up to a six-month delay in realizing their investment goals, increasing to 45% who say this has caused a delay of between six and nine months. Under a third (29%) say this has caused a delay of between nine and 12 months and 3% estimate it to be between 12 and 18 months.

This adverse impact on clients’ investment goals and delays on realizing them comes despite 95% of wealth managers and financial advisors viewing their clients’ investment goals as realistic. 18% say they are very realistic.

The global study by Ortec Finance, carried out among wealth managers, financial advisors and planners in Canada, the US, the UK, Australia, Germany and Switzerland, reveals that 69% say that the risk profile of their clients’ investments has increased in the past 12 months – with 3% saying it’s increased dramatically. Possibly in a bid to get their investment goals and objectives back on track, more than eight in 10 (82%) predict clients will further increase the risk profile of their investments in the next 12 months – with 20% saying it will increase dramatically.

Wealth managers and financial advisors regularly track and assess clients' financial goals and objectives to ensure they are on track to be achieved, and 86% say the systems they use to do this are effective. Almost half (49%) say they conduct a major review of a client’s overall financial goals and objectives every year and 44% say they do this every 12 to 18 months. Just 7% say this happens every 18 to 24 months. A review of whether their investment goals are on track to be achieved happens more frequently, with over half (58%) saying they do this at least once a month. Just over a third (38%) do this every six months and just 4% do this every year.

Almost all (97%) of wealth managers and financial advisors say the Know Your Customer requirements and regulations in their country helps them to monitor and assess risk in the portfolios they manage – with 31% saying these regulations are very good at ensuring this. Overall, 97% of wealth managers and financial advisors think that the industry is effective at continually monitoring clients’ investment goal, objectives and risk profiles. Of these, 30% think they are very effective.

Ronald Janssen, Managing Director Goals-Based Planning at Ortec Finance said: “Recent volatile markets have had a significant negative impact on the clients of wealth managers and financial advisors, with the vast majority of clients experiencing significant delays to realizing their investment goals – of up to a year or more. For these clients it is important to be supported how to get back on track again with the right investment strategy.

“It’s positive to see the regularity with which most wealth managers and financial advisors track and review their clients’ investment goals. This is vitally important but can take up a significant amount of time so investing in the best, scalable technology is essential, to enable advisors to effectively manage more clients and deliver more value.”

Ortec Finance provides wealth managers and financial advisors with scalable solutions that enable them to manage clients more efficiently and deliver more value to those clients. Its OPAL Planning tool supports banks, advisors and wealth management firms to translate client’s financial goals into an optimal investment strategy – providing forward-looking insights into whether clients are on-track regarding their investment objectives. Together with a fully integrated cash flow planning tool for a holistic view on the client situation, the OPAL Planning tool addresses both income and investment risk.

Find out more: https://www.ortecfinance.com/en/insights/product/opal