Who Are Robo-Advisor Users?

Abstract

The purpose of this study is to explore the demand for robo-advising services by analyzing the participants’ behavioral characteristics and investment patterns. With the 2015 Financial Industry Regulatory Authority Investor data, we found that robo-advisor users were younger investors with high risk tolerance, whose self-assessment of financial knowledge is comparatively higher than their actual knowledge, and were independent decision-makers. By controlling for those behavioral attributes of robo-advisor users, we also found that robo-advisor users were reluctant to invest in individual stocks, while they showed the largest preference for investing in pooled investment products such as Exchange Traded Funds. Implications of this study’s findings can be beneficial to financial planning practitioners, academics, and regulators.

Using an extended post-acceptance framework to examine consumer adoption of fintech

“…Consumers with higher risk tolerance levels have higher rates of adopting mobile banking, and consumers who think mobile banking is unsafe are less likely to adopt the fintech (Cope et al, 2013). Consumer risk tolerance is positively correlated with all forms of mobile fintech utilization (Zhang and Fan, 2023;Kim et al, 2019). Specifically, higher risk tolerance has been associated with consumers' adoption of robo-advisors (Fan and Chatterjee, 2020;Hong et al, 2020;Kim et al, 2019), mobile payment use (Li et al, 2020) and mobile investment trading (Fan, 2022).…”

“…Consumer risk tolerance is positively correlated with all forms of mobile fintech utilization (Zhang and Fan, 2023;Kim et al, 2019). Specifically, higher risk tolerance has been associated with consumers' adoption of robo-advisors (Fan and Chatterjee, 2020;Hong et al, 2020;Kim et al, 2019), mobile payment use (Li et al, 2020) and mobile investment trading (Fan, 2022). Among Asian consumers, risk-taking has also been associated with consumers' investment decision-making (Bunyamin and Wahab, 2022).…”

Robo-Advice (RA): implications for the sociology of the professions

“…It is vital to recognize that the term "robot" built into discussions of RAs is a misnomer, yet it has helped gain acceptance (Jung et al, 2018). RAs are heuristics or devices intended to adjust to constantly changing knowledge flows regarding investment markets, making this knowledge available to a clientele that pays for this advice (Kim et al, 2019). Unlike the manufacturing or domestic care robot, the knowledge transmitted by RA is not identifiable in an anthropomorphized form that, for instance, works on an assembly line (Pfeiffer, 2016), vacuums a house or guides a surgeon's arm.…”

“…, 2018). RAs are heuristics or devices intended to adjust to constantly changing knowledge flows regarding investment markets, making this knowledge available to a clientele that pays for this advice (Kim et al. , 2019).…”

“…Researchers frame RAs as state-of-the-art in delivering professional, client-oriented services within a regulated, highly competitive industry (Sironi, 2016). Technological advances in mobile payments (Kim et al. , 2019), blockchain (Chuen and Deng, 2017) and crowdfunding platforms (Chisti, 2016) provide momentum to frame FinTech and, within it, RAs as an evolution in the management of financial information, one with future revolutionary potential.…”