Robo advisors and access to wealth management

Michael Reher and Stanislav Sokolinski

Journal of Financial Economics, 2024, vol. 155, issue C

Abstract: We investigate how access to robo-advisors impacts the financial investment and welfare of less-wealthy investors. We leverage a quasi-experiment where a major U.S. robo-advisor significantly expands access by reducing its account minimum, increasing participation by middle-class investors but not the poor. A benchmark model calibrated to portfolio-level data rationalizes this increase: middle-class investors want sophisticated investing but cannot achieve it themselves. Their welfare rises moderately, driven by advanced features like multi-dimensional glide-paths and additional priced risk factors. Middle-age investors gain three times more than millennials. Our results reveal novel margins of demand for robo-advisors, helping explain their sustained growth.

Keywords: FinTech; Financial advice; Portfolio delegation; Inequality (search for similar items in EconPapers)
JEL-codes: D3 G11 G24 O3 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:155:y:2024:i:c:s0304405x24000527

DOI: 10.1016/j.jfineco.2024.103829

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