Deciding how to manage finances can be a significant step. In a world where algorithms manage portfolios, rebalance assets, and offer retirement advice, a question remains: do people trust robo-advisors? And if they do, why?
The psychology of trust in robo-advisors
Polaris Market Research expects the global robo advisory market to reach $72 billion by 2032.
Defining robo advice, Polaris explores how this technology offers “cost-effective solutions by minimizing human interaction, making them attractive to major industry players seeking efficiency. Through algorithmic calculations, these services provide comprehensive
solutions digitally, meeting consumer demands efficiently. Additionally, they have the potential to address low client satisfaction levels in the banking sector, driving further adoption. By utilizing online questionnaires to assess clients' risk tolerance,
financial status, and investment objectives, robo-advisors simplify the investment process compared to traditional methods, further fueling market demand.”
Trust is the cornerstone of financial relationships. As AI-driven platforms gradually take over the advisory role, trust must be earned in new ways, through design, transparency, and perceived competence. Ultimately, the choice between a robo-advisor
and a human financial advisor involves carefully considering financial goals, risk tolerance, comfort level with technology, and the value placed on personalised interaction.
However, human advisors are preferred by some because of the perceived empathy, accountability and shared values. Robo-advisors, in comparison, are often seen as impersonal, opaque and unaccountable.
Yet paradoxically, many users still rely on them, especially younger investors who value speed, convenience, and low fees over personal connection.
What builds trust in a
robo-advisor?
How can trust be defined? An article published by the Financial
Planning Association addresses how “trust in robo-adviser technology appeared to be an impediment to its widespread adoption among some demographics of customers seeking financial advice. Trust can be defined as the readiness to be
unguarded and to give up power and yield it to the trustor.”
The article goes on to explain that the “trust experience is the result of the continuous interaction of a customer’s values, attitudes, moods, and emotions toward a person or an entity. Trust can be interpersonal or institutional. Trust in a robo-adviser
could emanate from institutional trust where there seems to be a sense of safety with that institution.”
How can this be achieved? Financial firms should start by educating themselves about the potential support robo advisers can provide, how they operate and how much AI is used. While both traditional advisers and robo-advisers are trusted, a robo-adviser
can be a trusted component of financial advising, and a route to allowing employees to focus on more emphatic tasks.
Reasons to trust robo-advisors
1. Transparency: Users want to understand how decisions are made. Platforms that explain their algorithms in plain language or offer
‘explainable AI’ features tend to score higher on trust.
2. Consistency: Trust grows when the system behaves predictably. Sudden changes in strategy or tone can erode confidence, even if the logic
makes sense.
3. Design
and tone: Friendly, clear, and emotionally intelligent design can humanise the experience. Some platforms even use empathetic language models to simulate advisor-like conversations.
4. Performance:
Users also value risk management, goal alignment, and peace of mind, all of which can be enhanced by AI, if communicated well.
Designing for trust
Many robo-advisors use behavioural nudges, subtle prompts that guide users toward better decisions. These can build trust when they feel helpful, but backfire if they feel manipulative.
For example, a nudge to increase retirement contributions may be welcomed, but a nudge to invest in a volatile asset class may trigger suspicion.
While Gen Z and Millennials tend to trust digital platforms more readily, especially if they’re mobile-first and socially conscious, Gen X and Boomers often prefer hybrid models, where a human advisor is available to validate or explain AI-driven recommendations.
This generational divide is shaping the evolution of robo-advisors, pushing platforms to offer customisable levels of human interaction.
Trust in robo-advisors can erode quickly if there is market downturn where the AI fails to respond, a recommendation that feels ‘off’ or misaligned with goals, or there is a data breach or privacy concern.
Rebuilding trust requires proactive communication, transparency, and sometimes, human intervention.
As robo-advisors become more sophisticated, the challenge isn’t just technical, it’s psychological. Platforms must design not just for efficiency, but for emotional resonance. They must speak the language of trust: clear, consistent, and human-aware.
Because in this day and age, people don’t just want smart advice. They want to feel seen, safe, and supported, even if the advisor is made of code.