Robo-Advising for Small Investors

Abstract

We study the effects of robo-advising on investors' attention, trading, and performance on a large set of Employees Saving Plans covering a representative sample of French employees. We find that relative to self-managing, accessing the robo services is associated to an increase in the time investors spend to follow their portfolios and to an increase in trading activities. After having taken up the robo, investors are willing to increase their investment, bear more risk, and to rebalance their portfolio in a way to keep their allocation closer to the target. They also experience higher risk-adjusted returns. These effects tend to be stronger for investors with smaller portfolios, who are less likely to have access to traditional advice. Our results shed light on the dynamics of investors' trust towards the robo service and suggest that automated advice can promote financial inclusion.

Keywords: Robo-Advising, Financial Inclusion, Long-Term Investment, Limited Attention

JEL Classification: G11, G51, G41, G23, D14