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Robo-advisors: A substitute for human financial advice?

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  • Brenner, Lukas
  • Meyll, Tobias

Abstract

Using representative US investor data, we investigate whether automated financial advisors, also referred to as robo-advisors, reduce investors’ demand for human financial advice offered by financial service providers. Our results provide a strong negative relationship between using robo-advisors and seeking human financial advice. We show that the substitution effect of robo-advisors is especially driven by investors who fear to be victimized by investment fraud. Our findings suggest that robo-advisors seem to offer a valid alternative for seeking investment advice, especially among those investors who worry about potential conflicts of interest that appear in the context of human financial advice.

Suggested Citation

  • Brenner, Lukas & Meyll, Tobias, 2020. "Robo-advisors: A substitute for human financial advice?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 25(C).
    • Handle: RePEc:eee:beexfi:v:25:y:2020:i:c:s2214635019301881
    DOI: 10.1016/j.jbef.2020.100275
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    References listed on IDEAS

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    More about this item

    Keywords

    Robo-advisor; Financial advice; Digitalization; FinTech; Digital wealth management;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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