Examining the Role of Financial Advisor Robots (Robo-Advisors) in Individual Investors' Decision-Making: An Empirical Analysis

Abstract

In recent years, Robo-Advisors have emerged as effective tools for assisting individual investors in making optimal financial decisions. This study examines the impact of Robo-Advisors on individual investors' decision-making performance in Iran’s capital market. Data were collected through a randomized controlled trial (RCT) involving 200 individual investors, tracking their investment performance over a 12-month period. The results indicate that investors using Robo-Advisors made more rational decisions and achieved higher investment returns compared to their counterparts. Furthermore, financial experience and trust in technology played significant roles in the adoption and utilization of these systems. Challenges such as a lack of understanding of algorithm functionality and concerns about data security were identified as major barriers to adoption. This study provides recommendations for enhancing the acceptance and efficiency of Robo-Advisors in capital markets.