No trust, no use: how young retail investors build initial trust in financial robo-advisors

Purpose - The purpose of this study is to describe and analyse the effect of a set of determinants on initial trust and behavioural intention to use financial robo-advisors (FRAs). Design/methodology/approach - The theory of perceived risk and the behavioural finance paradigm were used to develop a conceptual model of retail investors’ initial trust in FRAs. Data collected from 554 young retail investors (YRIs) from Sweden and Malaysia were analysed using structural equation modelling. Findings - The results of this study indicate that the amount of public information, social media information-seeking and a rational decision style are significantly related to initial trust in FRAs, which in turn is significantly and positively related to the behavioural intention to use this technology. However, none of the risks under study significantly affect the initial trust in FRAs. Practical implications - Information is vital to inducing YRIs to rely on FRAs, so the more public and social media information is available, the higher their intention to use this technology. However, YRIs vary in decision style, and the results suggest implementing a more sophisticated system than the current “one-size-fits-all” approach to YRI behaviour. Originality/value - The empirical-based model enhances the knowledge of the initial phase of trust-building, when YRIs lack sufficient experience of FRAs. By collecting data from two countries, the study’s novel conclusions may help in developing effective FRA services for the youth segment.