Does robo-advisory increase retirement worry? A causal explanation
ISSN: 0307-4358
Article publication date: 9 February 2022
Issue publication date: 9 March 2022
Abstract
Purpose
Artificial intelligence and robo-advisory have become prevalent in the finance industry, and many people rely on robots instead of humans for financial advice. This study aims to examine whether robo-advisory increases retirement worry based on agency theory and rational choice theory.
Design/methodology/approach
The present study investigate whether relying on robots for financial advice increases retirement-related worry in the present study. Using a sample of 1915 investors from the National Financial Capability Study (NCFS) survey, the author conducted instrumental variable regression analysis to examine the causal linkage.
Findings
Using fear of financial fraud as an instrument variable, the study provides a causal explanation of the linkage between robo-advisory usage and retirement worry. After controlling for sociodemographic and financial literacy-related variables, it is found that robo-advisory increases retirement worry.
Originality/value
Findings of the study emphasize on downsides of the artificial intelligence-enabled robo-advisory for financial planning. This article provides evidence that a lack of human involvement in financial planning may lead to increased worry among investors, which calls for attention from the regulators and policymakers.
Keywords
Acknowledgements
The author of the present study would like to thank the FINRA Investor Education Foundation for providing the data used in this manuscript. No funding was received for the present study.
Citation
Chhatwani, M. (2022), "Does robo-advisory increase retirement worry? A causal explanation", Managerial Finance, Vol. 48 No. 4, pp. 611-628. https://doi.org/10.1108/MF-05-2021-0195
Publisher
:Emerald Publishing Limited
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