11th of June 2018
Jours fixes usually take place on the first monday of the month, starting at 5:00 p.m., in HoF E.01 / Deutsche Bank of the House of Finance (Campus Westend).
[Konstantin Bräuer, E-Finance Lab]
Fund Savings Plans with and without Robo-Advice
Fund savings plans are a powerful tool to build up savings. Due to low-transaction cost and low minimum contribution rates they are especially suitable for individuals with low wealth. Besides, automatic order execution can counteract a lack of self-control. Setting up a savings plan, however, is non-trivial as the choice of parameters such as contribution rate and fund mix pose potential for mistakes. This paper studies the role of non-individualized defaults and guidance on the choice of savings plan parameters in an unsolicited online setting. For this purpose, we use the natural experiment of introducing an automated investment solution (“robo-advisor”) at a large German online bank. Results indicate that robo-advice guidance motivates the choice of better diversified and lower cost funds in savings plans. In contrast, the influence of a default contribution rate is limited to an uplift of very low contribution rates to a new minimum threshold in the robo-advisor.