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Trust me, I am a Robo-advisor

Author

Listed:
  • Bernd Scherer

    (EDHEC Risk Institute
    University of Wuppertal)

  • Sebastian Lehner

    (EDHEC Risk Institute
    University of Wuppertal)

Abstract

This paper offers cross-sectional and data-intensive insights into Robo-advisory portfolio structures. For this purpose, we scrape portfolio recommendations for 16 German Robo-advisors. Our sample accounts for about 78% of assets in the German Robo-advisory market. We analyze about 243.000 pairs of recommended portfolios and their corresponding client characteristics. Our results show that current Robo-advice offers limited individualization. Variables that matter in modern portfolio choice like the amount and nature (beta) of human capital or shadow assets are largely ignored. Instead, portfolio recommendations are designed to meet investor preconceptions or the regulator’s understanding of portfolio choice. While ensuring consumer trust and regulatory approval makes business sense, it also limits the economic benefits of Robo-advisors. $$^1$$ 1

Suggested Citation

  • Bernd Scherer & Sebastian Lehner, 2023. "Trust me, I am a Robo-advisor," Journal of Asset Management, Palgrave Macmillan, vol. 24(2), pages 85-96, March.
    • Handle: RePEc:pal:assmgt:v:24:y:2023:i:2:d:10.1057_s41260-022-00284-y
    DOI: 10.1057/s41260-022-00284-y
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    References listed on IDEAS

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    Cited by:

    1. Zhu, Hui & Vigren, Olli & Söderberg, Inga-Lill, 2024. "Implementing artificial intelligence empowered financial advisory services: A literature review and critical research agenda," Journal of Business Research, Elsevier, vol. 174(C).

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