Oxford Risk warns about behavioural costs of upcoming UK Budget
The upcoming Autumn Budget will lead many investors – whether advised or self-directed – to question whether they should adjust their financial plans in response to both rumoured and official announcements, behavioural finance experts Oxford Risk says.
The uncertainty surrounding potential changes can create significant emotional discomfort, affecting decision-making both in the lead-up to and following the Budget.
The desire to know the ‘best’ course of action is almost universal among investors. However, the optimal decision varies for each individual, influenced by their unique financial situation and personality – the nuanced combination of psychological traits that shape their approach to investment decisions and emotional experiences throughout the investment journey.
Understanding an investor’s financial personality and how it influences their response to changes such as a Budget is crucial for maximising the benefits of legislative shifts. This insight enables advisers to tailor their guidance effectively, ensuring that recommendations align with each investor’s distinct behavioural tendencies.
Dr Greg Davies, head of behavioural finance at Oxford Risk, states: “Humans are hardwired to fear change. This instinct is rooted in our evolutionary past, where being adaptable to familiar environments kept us safe. However, without a reliable assessment of individual financial personalities, we lack insight into how someone will react to change, making it difficult to help them avoid unnecessary financial mistakes.
He adds: “The same person can simultaneously be under-responding in some ways and over-responding in others. Self-knowledge is fundamentally useful. Once we understand ourselves better, we can craft tailored strategies that align with our specific situation. Often, the best approach to change is to prepare for it beforehand. However, achieving this at scale – across potentially hundreds of clients – is impossible without technology to personalise engagement.”
Oxford Risk’s Behavioural Engagement Technology analyses relevant details about each investor, including their financial situation and personality traits, to prioritise the most useful prescriptions for each individual. Built on extensive behavioural expertise and tested on thousands of investors, this technology harnesses AI to learn from every interaction, refining the advice presented to each investor in each situation
