The behavioural financial experts say that the “noisy” errors are caused by irrelevant factors including an advisers’ current mood, the time since their last mood or even the weather.
To combat this, Oxford Risk has called on Australian wealth managers and financial advisers to increase their use of technology, saying the most effective noise-cancelling remedy is to use software to guide decisions so they become more consistent.
The report states that if a specific framework for the measurement of risk tolerance, capacity and other factors are put in place, it can be run at scale and speed.
“Identifying noise isn’t about eradicating inconsistencies. It’s about eradicating unjustifiable ones and evidencing justifiable ones,” Oxford Risk’s head of behavioural finance, Greg Davies, said.
“Like the Decision Review System (DRS) used in cricket or the Television Match Official (TMO) in rugby, technology can be employed to greatly increase consistency and accuracy.
“But in the end when the margins are extremely tight it should be the umpire’s call. So should it be in the world of investment advice.”
Another salesperson giving advice.
If the Govt hadn’t negatively impacted just about every advisers mood for the last decade then maybe we would have needed noise cancelling strategies!!!
The amount of unnecessary noise the Liberal Govt has supported in their quest to eliminate financial advisers and their businesses from the face of the earth had been so loud you can’t hear yourself think.
A lot more quiet please and things will be significantly better for all concerned.
Just let us do our job and leave us alone.
Nonsense.
mmmm….DRS has been an outstanding success – good example Greg!!
More noise!