Financial advice and robo advice in the investors' perception

 

Financial advice and robo advice in the investors' perception
Evidence from a qualitative study

M. Caratelli, C. Giannotti, N. Linciano, P. Soccorso

FinTech Working Paper no. 6 - December 2019 [pdf format] 

Appendix 1 [pdf format]

ISBN 9788894369779
 

Abstract
The ongoing institutional debate wonders whether robo advice may potentially bridge the advice gap, by reaching both ‘underserved' and ‘excluded' investors, who are unable to fully access the service. The present work aims to investigate the factors that may trigger both potential and actual interest in robo advice, thus contributing to widen the segment of investors receiving personalised recommendations. The study analyses the qualitative evidence gathered from two focus groups and four in-depth individual interviews, all involving investors. The participants in the focus groups are, respectively, investors supported by a human financial advisor (i.e., making decisions after receiving a customised recommendation by a dedicated advisor) and individuals interacting with bank staff only (i.e., making decisions without the support of a dedicated advisor). Individual interviews involve four users of one of the main providers of automated advice services active in the Italian market. Overall, the study highlights that the perceived objectivity of the algorithm and the customer experience granted by a digital platform may trigger (or have already triggered) interest in robo advice, mainly among financially and digitally literate investors. However, the hybrid model is always preferred to the pure automation, as the interaction with a human advisor is deemed as valuable both on educational grounds and in the occasion of key phases of the investment (e.g., portfolio monitoring or market turmoil). Given the evidence of this qualitative study, therefore, the hybrid robo advice can potentially bridge the advice gap for the more sophisticated investors, to the extent that they are willing to accept technology developments. To our knowledge, this is the first qualitative study that contributes to the debate on the advice gap by providing food for thought important for consumer protection policies and educational initiatives.

 

Authors
Massimo Caratelli (Università degli Studi Roma Tre, massimo.caratelli@uniroma3.it)
Claudio Giannotti (Università LUMSA di Roma, c.giannotti@lumsa.it)
Nadia Linciano (Consob, n.linciano@consob.it)
Paola Soccorso (Consob, p.soccorso@consob.it)
 

JEL Classifications: D14, D18, G23, G41, G51, G53, K22.
Keywords: FinTech, digitalizzazione, consulenza automatizzata, robo advice, consulenza in materia di investimenti, MiFID II, focus group, in-depth interview.