Personalized Robo-Advising: Enhancing Investment through Client Interaction
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Abstract (arXiv)
Automated investment managers, or robo-advisors, have emerged as an alternative to traditional financial advisors. The viability of robo-advisors crucially depends on their ability to offer personalized financial advice. We introduce a novel framework, in which a robo-advisor interacts with a client to solve an adaptive mean-variance portfolio optimization problem. The risk-return tradeoff adapts to the client's risk profile, which depends on idiosyncratic characteristics, market returns, and economic conditions. We show that the optimal investment strategy includes both myopic and intertemporal hedging terms which are impacted by the dynamics of the client's risk profile. We characterize the optimal portfolio personalization via a tradeoff faced by the robo-advisor between receiving client information in a timely manner and mitigating behavioral biases in the risk profile communicated by the client. We argue that the optimal portfolio's Sharpe ratio and return distribution improve if the robo-advisor counters the client's tendency to reduce market exposure during economic contractions when the market risk-return tradeoff is more favorable.
Key facts. Cited by 6 papers in the map (data through 14 Oct 2026). First posted on arXiv 4 Nov 2019.
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Citing papers per year: 2021: 2; 2022: 0; 2023: 0; 2024: 2; 2025: 1; 2026: 1.
6 papers.
- 2021Recent Advances in Reinforcement Learning in Financecited by 110
- 2021Robo-Advising: Enhancing Investment with Inverse Optimization and Deep Reinforcement Learningcited by 7
- 2024Personalized Reinforcement Learning with a Budget of Policiescited by 4
- 2024Inference of Utilities and Time Preference in Sequential Decision-Makingcited by 0
- 2025Human-Robo-advisor collaboration in decision-making: Evidence from a multiphase mixed methods experimental studycited by 0
- 2026A Noise-Robust Elicit-to-Optimize Framework for Distortion Riskmetrics via Inverse Reinforcement Learningcited by 0
- 2026A Noise-Robust Elicit-to-Optimize Framework for Distortion Riskmetrics via Inverse Reinforcement Learning15 Jul 2026
- 2025Human-Robo-advisor collaboration in decision-making: Evidence from a multiphase mixed methods experimental study2 Oct 2025
- 2024Inference of Utilities and Time Preference in Sequential Decision-Making24 May 2024
- 2024Personalized Reinforcement Learning with a Budget of Policies12 Jan 2024
- 2021Recent Advances in Reinforcement Learning in Finance8 Dec 2021
- 2021Robo-Advising: Enhancing Investment with Inverse Optimization and Deep Reinforcement Learning19 May 2021