Robo-Advisor Adoption, Willingness to Pay, and Trust—Before and at the Outbreak of the COVID-19 Pandemic
65 Pages Posted: 15 Apr 2019 Last revised: 31 Aug 2020
Date Written: July 2020
We compare readiness to adopt and willingness to pay for (as a proxy for trust) the same financial advice labeled three ways (algorithm, human, and a hybrid of algorithm and human) using an online and a computerized laboratory experiment. Our experiments were conducted before and at the outbreak of the COVID-19 pandemic. We observe a significantly higher readiness to adopt financial advisors during the pandemic, a period of high volatility in the financial markets, compared to before. In the pre-pandemic period, for the same potential financial advice, we observe age and gender differences in the readiness to adopt and pay for the different advice options. These differences hold after controlling for a vector of technology adoption constructs, financial literacy, quantitative knowledge, and personal and demographic proxies. Yet, at the outbreak of the pandemic, we observe less sensitivity to the advisor's purported type and no algorithm aversion. Our findings suggest that during a crisis, individuals care more about having an advisor and are less sensitive to the type of advisor, whereas in ordinary times, they are more sensitive to the type of advisor and overall desire less advice. 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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