Robo Advice and Access to Wealth Management
85 Pages Posted: 28 Jan 2020 Last revised: 14 Jan 2023
Date Written: October 29, 2022
Abstract
We examine how access to automated wealth managers affects household investment and
welfare across the wealth distribution. Our setting features novel microdata from a major
U.S. robo advisor and a quasi-experiment in which the advisor reduces its account minimum
by 90%. Based on a difference-in-difference estimator, the reduction significantly increases
middle-class households’ participation but does not affect wealthier or poorer households. We
rationalize this behavior with a quantitative model calibrated using portfolio-level data. The
reduction raises welfare through diversification, priced risk exposure, and personalization. The
overall welfare gains are moderate but heterogeneous. Older households with weak earnings
growth gain most.
Keywords: FinTech, Financial Advice, Portfolio Delegation, Inequality
JEL Classification: G11, G24, D3, O3
Suggested Citation: Suggested Citation