The Role of AI & Robo-Advisors in Reducing Behavioural Biases

The emergence of Artificial Intelligence (AI) and robo-advisory platforms has transformed the landscape of retail investing, particularly in digitally evolving markets like India. This study explores the role of AI-driven robo-advisors in reducing behavioural biases among Indian retail investors, with a focus on commonly observed biases such as overconfidence, herding, confirmation bias, loss aversion, and anchoring. Drawing from both primary data—gathered through surveys and interviews—and secondary sources, the research highlights how algorithmic interventions like risk profiling, goal-based planning, auto-rebalancing, and personalized dashboards influence investor decision-making. The findings reveal a significant level of awareness about AI tools among young, tech-savvy investors, although trust and confidence in such platforms remain moderate. Notably, users identified that robo-advisors have helped reduce emotional and cognitive biases, leading to more disciplined and rational investment behaviour. A mixed-methods approach combining descriptive statistics and thematic analysis was employed to triangulate data, ensuring robust insights. The study also examines regulatory and ethical concerns, such as transparency, algorithmic bias, and data privacy, under SEBI and India’s evolving digital frameworks. Despite limitations such as sample size and geographic concentration, the research provides actionable insights for fintech developers, educators, and policymakers. Overall, robo-advisors are shown to have strong potential in democratizing financial advice and promoting behavioural finance awareness in India’s growing retail investment ecosystem.