Automated financial advice: quality, ethical and design challenges

Nearly 30% of Dutch households are at risk of having insufficient financial resources after retirement (Knoef, Been et al. 2016) and 40% of 35-55 year-olds have no idea of their financial situation after retirement (Nibud 2019). Research by the AFM revealed that pension providers do not always properly guide participants in their choices (AFM 2021). Thus, it is important that individuals are well-informed about their own retirement situation, understand the choices they can make, and the consequences of these choices.

According to the AFM (2018) sound financial advice can help, for example, to improve retirement planning. For example, automated financial advice could be used to assist participants in choosing a fixed versus variable annuity, deciding on taking out a lump-sum amount, determining risk capacity, or, even more broadly, assessing their financial situation and providing insight on whether it is sufficient for the goals that participants have for retirement (and to select those goals in the first place). Although holistic financial advice is technically possible, there are still significant challenges that prevent its development and implementation: What is ‘good’ financial advice? Which ethical standards (should) exist? Are goals appropriate as the basis for automated financial advice? How can participants be supported in setting goals? How can the complex information be presented to facilitate understanding and behavior?

To address these challenges, this project generates insights into the definition of ‘good’ automated financial advice, ethical considerations, goal setting, and data visualization of automated financial advice.

This project is partly funded with PPS from the Ministry of Economic Affairs and Climate through CLICKNL.

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