AN EVALUATION OF ROBO-ADVISOR RISK ASSESSMENT QUESTIONNAIRES IN SELECTED ASIA PACIFIC ECONOMIES

Abstract

This study was conducted to evaluate the risk assessment questionnaires of a sample of 30 robo-advisors from seven selected Asia Pacific economies. Using a descriptive research approach, the study initially classified the questions gathered from the robo-advisor risk assessment questionnaires into risk capacity and risk tolerance, and further divided them into 26 subcategories. Then a comparison of the number of questions in each robo-advisor’s questionnaire was followed, where the risk tolerance wa found to have a higher proportion of questions than risk capacity. Next, the comparison of the questions per subcategory for each sample economy was done and reported that questions on investment amount dominate the risk capacity category, while risk versus return preference prevails in the risk tolerance category. Lastly, an analysis of the correlation between the answer value and percentage of equity in the recommended portfolios of robo-advisors in each sample economy was performed. The findings revealed that most of the robo-advisors formulate their portfolio recommendations without utilizing all the parameters or questions in the risk assessment questionnaires. The key influences of robo-advisors’ portfolio recommendations were asset allocation choices of the investors, followed by the investors’ attitude towards risk and risk versus return preference. This paper enriches the literature on robo-advisors by evaluating the risk assessment questionnaires adopted in the Asia Pacific region. In terms of practical implications, the results highlight the deficiencies of the existing questionnaires and assert that they should be reviewed and redesigned to more accurately capture investors’ risk characteristics and reflect all information gathered in the portfolio recommendations.