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Financial Education and Advice: The Case of Robo-advisors

Last registered on April 17, 2019

Pre-Trial

Trial Information

General Information

Title
Financial Education and Advice: The Case of Robo-advisors
RCT ID
AEARCTR-0004102
Initial registration date
April 11, 2019

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
April 17, 2019, 8:18 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Region

Primary Investigator

Affiliation
Ludwig Maximilian University of Munich

Other Primary Investigator(s)

PI Affiliation
Ludwig Maximilian University of Munich

Additional Trial Information

Status
In development
Start date
2019-05-13
End date
2019-05-17
Secondary IDs
Abstract
Some scholars argue that financial literacy is a complement rather than a substitute to financial advice as it allows investors to better assess (and demand) quality and thus have more confidence in the advisor. While financial advisors and managers rely on information asymmetry as part of their business model, several arguments point toward a positive impact of educating investors on financial matters on the use of their services. Thus, we intend to study in a laboratory setting the impact of financial education on the adoption of technology-based advisory algorithms, so-called robo-advisors, as well as the interaction with investor characteristics. On the one hand, they might be in a good position to effectively educate investors due to their broad customer base and digital service provision. On the other hand, they might benefit from communicating the underlying investment logic to oppose algorithm aversion due to the perception of a “black-box” decision-making process.
External Link(s)

Registration Citation

Citation
Litterscheidt, Rouven and David Streich. 2019. "Financial Education and Advice: The Case of Robo-advisors." AEA RCT Registry. April 17. https://doi.org/10.1257/rct.4102-1.0
Former Citation
Litterscheidt, Rouven and David Streich. 2019. "Financial Education and Advice: The Case of Robo-advisors." AEA RCT Registry. April 17. https://www.socialscienceregistry.org/trials/4102/history/45093
Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2019-05-13
Intervention End Date
2019-05-17

Primary Outcomes

Primary Outcomes (end points)
Use of robo-advisor in incentivized financial decision-making task
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Participants first earn a budget in a real effort task, which is then used in an incentivized four-period financial decision-making game. In each period, subjects allocate their budget to three distinct assets that evolve probabilistically in value. The value of their portfolio after the last period determines their payout. Subjects can delegate decision-making to a robo-advisory service for all or parts of their budget at a proportional fee. The service elicits the subjects’ risk preferences through a risk questionnaire, assigns a risk profile, implements a corresponding portfolio and re-establishes the portfolio weights after each trading period. To investigate the impact of financial education on the willingness to use the robo-advisor, some subjects are provided with additional information on the principles of operation of the robo-advisory algorithm.
Experimental Design Details
Randomization Method
Randomization done in laboratory by a computer
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
No clusters
Sample size: planned number of observations
200 students
Sample size (or number of clusters) by treatment arms
100 students in treatment group, 100 students in control group
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials