Interventions are most effective when they use the right words, at the right time, and in the right tone.
Knowing which buttons to press to provide emotional comfort for a given client is something good advisers do intuitively. But to do it intuitively can take years for each relationship. And not all investors have a relationship with a human adviser. Some self-direct on entirely digital platforms.
However, it’s now possible to radically amplify the emotionally comforting power of personalised investor interventions.
Behavioural engagement technology
In investing, personalisation stems from a deep understanding of each individual’s financial personality on multiple dimensions.
To pick a few among many: to what extent is an investor prone to emotional responses to the present state of their investment journey (and external stimuli such as the news)? How capable and comfortable do they feel about their ability to make good financial decisions?
What’s their propensity to act quickly and on emotional instinct when making investment and spending decisions? What (if any) aspects of sustainable investing drive their decisions?
And importantly, how do these interact with each other in certain situations, say when markets are falling or upon retirement?
Grounded in analysis of thousands of investor financial personality assessments across four continents, we have identified stable clusters of behavioural tendencies that act as personality ‘signatures’ – giving strong, scientific indications of which messages, and which way to deliver them, are likely to work best for each investor in each situation.
Both the content of these interventions and the confidence with which they can be prescribed can be amplified by combining them with existing data on client online behaviour patterns, transactions patterns, and holdings to get an more refined sense of what works best for whom, when, and in what way.
Greg B Davies is head of behavioural finance at Oxford Risk
