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Robo-advice and the future of delegated investment

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Abstract

Robo-advisors can replace financial advisors and asset managers at low costs. However, human managers and advisors will survive. This is predominantly because although robo-advisors primarily appeal to a clientele of already financially sophisticated investors, they lack some of the qualities people look for in a “money doctor”, and their business models have not yet stood the test of time. While a general algorithm aversion is absent in the financial domain, even tech-savvy millennials do not particularly favor robo-advisors. As new survey data shows, investors view algorithms as an aid to human managers rather than competitors. A hybrid model with humans and robos working together, as already implemented by some financial institutions, might be the future of delegated investment.

Suggested Citation

  • Merkle, Christoph, 2020. "Robo-advice and the future of delegated investment," Journal of Financial Transformation, Capco Institute, vol. 51, pages 20-27.
    • Handle: RePEc:ris:jofitr:1638
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    Cited by:

    1. Blaschke, Justus & Kriebel, Johannes, 2021. "Robo Advisory Customer Groups: Who Requires Advice?," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 75(3), pages 397-410.

    More about this item

    Keywords

    Robo-advice; delegated investment; money doctor; algorithm aversion.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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