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Authors Min-Rui Choo, Wei-Che Tsai, Yu-Jen Hsiao & Sharon S. Yang
Pages 19–42
Keywords Subjective financial literacy, Objective financial literacy, Financial literacy overconfidence, FinTech service, Robo-advisor adoption |
How to Cite Choo, M.-R., Tsai, W.-C., Hsiao, Y.-J., & Yang, S. S. (2023). Financial literacy and robo-advisor adoption: Evidence from Taiwan. Management Review, 42(4), 19–42. https://doi.org/10.6656/MR.202310_42(4).ENG002
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Abstract
Purpose – This study aims to examine the correlation between financial literacy and the utilization of robo-advisors, which proposes that high subjective financial literacy and overconfident individuals tend to adopt the robo-advisor services.
Design/methodology/approach – A National Survey is conducted in 2020, which was undertaken by the Taiwan Academy of Banking and Finance and NN Investment Partner & Nomura SITE Financial Research Center in Taiwan. The logistic regression model is utilized to study the effect of financial literacy on robo-advisor adoption.
Findings – The empirical results reveal that robo-advisor adoption positively related to financial literacy, but this is mainly due to subjective instead of objective financial literacy. Furthermore, overconfident individuals tend to use robo-advisors, and this relationship is more pronounced among older individuals, those less wealthy, and non-full-time students.
Research limitations/implications – Since the existence of selection bias and the lack of adoption of robo-advisor services by a few respondents has raised concerns about the financial literacy of Taiwanese individuals, further studies should be conducted on the population using Taiwan’s demographic reports. This study is designed to identify the financial literacy gap between objective and subjective; however, the measurement of financial literacy overconfidence and the design of survey questions are inaccurate.
Practical implications/Social implications – Policymakers should consider that robo-advisors can help reduce the negative consequences of low financial literacy. Financial institutions must be prudent to use subjective financial literacy to judge retail financial products’ suitability. Therefore, attempts to improve financial literacy among financial consumers could have a crucial impact.
Originality/value – Positioning FinTech service as providing stronger decision-making at a lower cost with fewer conflicts of interest misses the target demographic completely. We need to work on financial literacy so that people will be more attracted to FinTech services, and they can help people be financially well.