Abstract
Using representative US investor data, we investigate whether automated financial advisors, also referred to as robo-advisors, reduce investors’ demand for human financial advice offered by financial service providers. Our results provide a strong negative relationship between using robo-advisors and seeking human financial advice. We show that the substitution effect of robo-advisors is especially driven by investors who fear to be victimized by investment fraud. Our findings suggest that robo-advisors seem to offer a valid alternative for seeking investment advice, especially among those investors who worry about potential conflicts of interest that appear in the context of human financial advice.
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