FinTech Brings a Bias from Psychology Labs to a Two-trillion-dollar Market

Robo-advisors typically make investment recommendations based on surveys of clients’ preferences. Consequently, biases induced by the surveys would be embedded in those recommendations and hence may influence investors’ financial decisions. We examine this hypothesis through two studies. First, we administer a nationwide survey of experienced U.S. investors and find that the order of listed choices significantly influences their responses to risk-tolerance questions commonly used by robo-advisors. Second, we collaborate with a leading robo-advisor in China to conduct a preregistered RCT and demonstrate that the order effect significantly alters both the robo-advisor’s risk assessments and its clients’ investment decisions, raising new ethical concerns in the FinTech era.