The Behavioural Implications of Passive Robo-Advising on Personal Savings - Evidence from Kron AS

Abstract

The political shift and technological development since the 2008 financial crisis have shaped a new era, taking financial wealth management to robo-advisory (RA). This thesis studies the behavioural implications of a Norwegian passive roboadvisor (RAr) that constructs tailored saving plans for retail investors. These implications are investigated on individual and stereotype saving behaviour. Main results show, that changes to invested capital and expected investment horizon are the most relevant factors for diverse successes in passive robo-advising. Investors providing supplementary capital at later points in time acquire a 3.4% higher Assets under management (AUM) than investors who keep their invested capital constant. Those who withdraw funds from the RAr marginally decrease their AUM. This adjustment behaviour is different for distinct investor groups. Trend-chasing does not explain this difference. Deviations from intended saving behaviour in the roboadvisor are greater for stereotypes around age, gender, and residence, where age was the main driver. Differences between stereotypes were reduced over time, however individual differences in behaviour were not. To be beneficial for personal savings, passive robo-advising has to be extended from pure portfolio advice to counsel on adjusting invested capital. Identified possible solutions are to incorporate indi����id����ali�������� in ����he ad����isor����s c����s����omer assessmen���� and notifying on potential pitfalls concerning adjustments to invested capital. Keywords - Robo-Advisory, FinTech, Behavioural Finance, Personal Traits, Stereotypes, Decision-making, Investment Behaviour