Financial advisers and wealth managers can play a significant role in helping investors avoid an “emotional rollercoaster” in the year ahead as stock market volatility surges.
That is the message from behavioural finance experts Oxford Risk.
However, it has warned that advisers need better technology to deliver more personalised support for clients.
It is expecting turbulent market conditions in 2025, driven by policy changes from the Trump administration and the removal of fact-checking on social-media sites.
Oxford Risk analysis shows knee-jerk emotional reactions to market swings cost investors an average of 3% each year in returns.
The firm predicts losses could soar this year as a “perfect storm” of volatility drives investors to make mistakes and invest in assets they may not even understand.
Oxford Risk said behaviourally-driven financial advice software can help investors and advisers to avoid emotional mistakes.
However, it warned that without these solutions in place, investors will likely experience bad decision-making and poor financial outcomes.
Analysts are predicting high levels of volatility with markets, with the expected introduction of trade tariffs and other policy announcements from the Trump administration, global inflation and recession worries, and interest-rate decisions by central banks the major concerns.
Social-media speculation will become more of an issue, Oxford Risk believes, with the scrapping of fact-checking by Meta on its Facebook, Instagram and Threads sites in the US in line with similar policies on X leading to a rise in misinformation and disinformation about investment.
The boosting of cryptocurrencies and digital assets by the new US administration, will see more investors attracted to trading Bitcoin and other cryptocurrencies despite many not understanding the risks, the firm adds.
Oxford Risk chief client officer, James Pereira-Stubbs, said: “Volatility is part of investing and people need to be able to tune out the noise, focus on their long-term financial plans and not rush to buy or sell. But the reality is many are not able to do so when markets are more unstable.
“It is going to be increasingly difficult in the year ahead, with a real risk to investors as markets swing wildly in reaction to major policy changes from the Trump administration, while issues such as inflation and interest rates remain uncertain.
“Advisers can address these issues for clients but they need technology support so they can provide hyper-personalised engagement that helps people get invested, stay invested and make better decisions throughout their journey.
“By addressing individual needs and behaviours, financial firms can turn missed opportunities into better outcomes for investors.”
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