Robo-Advisor Adoption, Willingness to Pay, and Trust — An Experimental Investigation
90 Pages Posted: 15 Apr 2019
Date Written: December 2018
We compare readiness to adopt and willingness to pay for (as a proxy for trust) financial advice provided three ways (algorithm, human, and a hybrid of algorithm and human) using an online and a computerized laboratory experiment. For the same potential financial advice, we observe age and gender differences in the readiness to adopt and pay for the different advice options. We observe nonlinear age differences; participants between the ages of 20 and 30 years are willing to pay more for algorithmic than human advice. Introduction of human assistance to the algorithm (hybrid model) only lowers their willingness to pay. Conversely, participants between the ages of 31 and 44 years are less ready to adopt and pay for the algorithmic advice. They are willing to pay more for the advice from the hybrid model than from the algorithm and a similar amount for the hybrid and human advice. The age group of 45 year-olds and above exhibits a nonsignificant tendency to adopt the algorithmic compared to the human advice but adding human assistance reduces their willingness to pay. We find that men are ready to adopt and pay more than women for financial advice in general and those differences derive mostly from the algorithm advice alternative gap. These results hold after controlling for a vector of technology adoption constructs, financial literacy, quantitative knowledge, and personal and demographic proxies. Our findings relate to the financial, trust, artificial intelligence, and information literatures.
Keywords: robo-advisor, willingness to pay, trust, technology adoption, financial literacy, experiment
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