Robo-Advisor Adoption, Willingness to Pay, and Trust — An Experimental Investigation

90 Pages Posted: 15 Apr 2019

See all articles by Daniel Ben-David

Daniel Ben-David

Hebrew University of Jerusalem -Department of Finance

Orly Sade

Hebrew University of Jerusalem - Department of Finance

Date Written: December 2018

Abstract

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

Suggested Citation

Ben-David, Daniel and Sade, Orly, Robo-Advisor Adoption, Willingness to Pay, and Trust — An Experimental Investigation (December 2018). Available at SSRN: https://ssrn.com/abstract=3361710 or http://dx.doi.org/10.2139/ssrn.3361710

Daniel Ben-David

Hebrew University of Jerusalem -Department of Finance ( email )

Israel

Orly Sade (Contact Author)

Hebrew University of Jerusalem - Department of Finance ( email )

Mount Scopus
Jerusalem, 91905
Israel
972 2 588 3227 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
138
Abstract Views
481
rank
207,982
PlumX Metrics