THE ROLE OF TRUST IN ROBO-ADVISORY SERVICES IN SHAPING PORTFOLIO DIVERSIFICATION BEHAVIOR. A CASE OF FINTECH AND BANK INVESTMENT APP USERS

Abstract

This study examined how trust in the robo-advisory services and financial literacy are associated with portfolio diversification behavior, where investor confidence in automated investment recommendations acts as a mediating factor, among the FinTech and bank application users in Sindh, Pakistan. A quantitative survey was carried out to 179 respondents, and the analysis of data was done using PLS-SEM. It is shown that both trust and financial literacy have a positive impact on investor confidence which positively affect portfolio diversification behavior. Also, investor confidence was observed to partially mediate the association between trust, financial literacy and diversification which underscores its important role in making effective investment decisions. The research also highlights the need to establish trust and educate people on financial literacy to encourage informed investment choices in online financial tools. The implications of the findings on financial institutions, policymakers, and developers of FinTechs are to promote responsible investment behavior and better diversification of portfolios among digital investors.