Financial robo-advisors: A scoping review and future research directions

Abstract

Financial robo-advisors (FRAs) enable households with a limited amount of money to participate in financial markets without time or place constraints. While FRAs can help investors overcome behavioural biases, they also have disadvantages, such as reliance on a limited number of inputs and a lack of individualization. We conduct a scoping literature review of the nascent research on FRAs to synthesize previous research results. We identify two streams of literature: (1) asset management, which focuses on designing FRAs and improving the functioning of these machine advisors, and (2) behavioural finance, which investigates technology adoption and issues concerning biased advice. Among other topics, future research should address why FRAs do not appeal to less financially literate people, who would likely benefit more than others from using them.