Robo Advice and Access to Wealth Management

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