Wealth managers across Europe admit their systems for assessing client portfolios are "not suitable for the task" and rely too much on "subjective human judgement".
According to the study from Oxford Risk, almost two-thirds (65%) of the wealth managers agreed that "current systems are too reliant on subjective human judgement".
Just 5% disputed this and said there was not too much subjectivity, while the remaining 30% were ‘neutral' on the issue.
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Oxford Risk analysts said 64% of advisers had criticised existing suitability processes and systems for "being too cumbersome" and not responding to rapid changes in clients' circumstances fast enough.
The study was conducted through a survey of 150 wealth managers across UK, France, Italy, Spain and Ireland during September 2022, which sought to ascertain how up to scratch their systems were for providing clients with appropriate investments.
A suitability process or test is where a financial services provider determines whether a product is in line with a client's investment objectives, risk requirements and knowledge before completing a transaction.
Greg Davies, head of behavioural finance at Oxford Risk, said: "It is damning when wealth managers themselves admit that their suitability processes and systems are not suitable for the task."
He said the last three years had been especially challenging, listing the pandemic and ongoing investment market volatility coupled with rising inflation and interest rates as some of the issues clients were facing.
Given all the macroeconomic and market volatility, Davies said these process "might have felt the strain", while some others are "simply not be up to the task".
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"Many detailed and time-intensive cash flow modelling tools are too front-heavy, used at the start of the relationship, but then frequently ignored in cursory annual reviews," he explained.
He used the start of the Covid-19 pandemic as a case study, stating that the financial circumstances of effectively all clients changed substantially over a period of weeks and the "cumbersome tools and annual review processes were inadequate to respond".
Davies said: "Life changes fast; tools should reflect this."
Although the results from this survey were poor, the behavioural finance head was encouraged by the fact that wealth managers had at least identified these inefficiencies.
"It will be more encouraging to see how they address the issue given that there are solutions available," he added.
