Advisers expectant of risk suitability backlash
A survey of Australian wealth managers has revealed their fears around clients making compensation claims after failing to understand risk suitability.
Conducted by behavioural finance firm Oxford Risk of 100 wealth managers who managed around $232 billion, it found over half (58%) expected pressure to compensate clients would increase over the next five years.
This had been exacerbated by the recent market volatility, rising inflation and interest rates which meant clients may have received lower returns than they were accustomed to.
Some 35% said their clients had made impulsive decisions to the detriment of short-term plans and 34% had bought high and sold low.
Some 77% expected action from the regulator over the next five years to require them to better understand risk tolerance and suitability.
Bianca Kent, head of client and strategy, Australia at Oxford Risk said: “Investment markets have been highly volatile in the last three years and many clients will inevitably be disappointed with their returns.
“It is worrying however that so many wealth managers fear they will face compensation claims over their advice and particularly worrying that it will focus on a poor understanding of client risk profiles.
“There is a widespread expectation from wealth managers that there will be tougher regulation on the issue, and we would urge them to act now and get ahead of any changes in regulation.”
AUTHOR
Laura Dew
Recommended for you
More than 25 winners have been announced at the second annual Australian Wealth Management Awards.
A former financial adviser has been extradited from New Zealand after being alleged to have misappropriated $4.1 million from 13 clients.
Adviser numbers have continued the winning streak for the 2025–26 financial year with the seventh consecutive week in the green, buoyed by a steady flow of new entrants.
Netwealth chief executive Matt Heine has explained the platform is focused on accelerating its share of the affluent advice market as its NPAT reaches $116 million.
