1 CHAPTER I INTRODUCTION 1.1 Background The entry and penetration of Robo-advisors in the Indonesian investment landscape bring about a significant change that ushers towards digital financial management, comfortably meeting the demographic of millennial investors and the first-timers. Bibit closing $30 million Series B round from Sequoia Capital India and other such Robo-advisors entering the market have shined a spotlight on these growing opportunities within the country to invest in Indonesia. By targeting the largest demographic group that constitutes the millennial and first-time investors, Bibit platform is designed to take away some of the intimidations that are commonly seen with investments in the financial markets by offering tailor-made portfolio management based on individual risk profiles and investment objectives (Shu, 2021). This is in tandem with the overall trend, where the country witnessed 56 percent year-on-year growth in 2020, involving retail investor participation, and 92 percent of it happened in the age group of 21-40 (Shu, 2021). The financial services sector is an important lifeblood that flows for the management of assets and equity, giving investment services to retail or commercial investors. Within the ambit of this sector, the capital market all continues to expand significantly, as seen in the instruments: mutual funds, stocks, and bonds; another other assets are just making it economically broader. This development is also motivated and pushed by financial inclusion and literacy growing in Indonesia as firmly stated by the Financial Services Authority (OJK) through a survey recording that marked massive growth in banks, insurance, and financing from 2016 to 2019. Yet, the AUM (Assets Under Management) market of Indonesia does not compare with those of neighboring countries, such as Malaysia and Thailand. As of the end of 2018, the overall value of AUM in Indonesia reached only IDR 507 trillion, which is much lower than Malaysia (IDR 1,918 trillion) and Thailand (IDR 2,004.8 trillion). And, also, Indonesia's value of AUM per capita is quite low: IDR 1.8 million, far behind Malaysia, whose AUM per capita amount to IDR 60.8 million. This indicates that although Indonesia's AUM market continues to grow steadily, it still faces a daunting task of enticing significantly 2 more funds to be invested by the population and encouraging participation in the capital market. One innovation that can increase this participation is the robo-advisor, an artificial intelligence-based advisory service first developed by Betterment in 2008 and followed by large firms such as Charles Schwab, Vanguard, and BlackRock. By automating asset allocation and investment strategies based on the investor’s risk profile and preferences, robo-advisors offer a more logical and objective investment approach compared to human money managers who may be more prone to emotional bias. As technology advances, robo- advisors have seen significant improvements in capabilities, from simply managing a predetermined portfolio, to using machine learning algorithms and artificial intelligence to recommend more sophisticated investment strategies. In Indonesia, the introduction of robo- advisors began with the emergence of platforms such as Bibit and Halofina which provide goal-based investment recommendations, tailored to each user’s risk profile. Although Indonesia still lags behind in the adoption of robo-advisors compared to developed countries, the potential of these platforms to expand financial inclusion is enormous, especially in supporting new investors in making more informed and strategic financial decisions. Robo-advisors seem to hold great potential to disrupt effective personal financial planning; however, Indonesia adopts much slower than all neighboring countries in Southeast Asia. For example, it is embraced by both Singapore and Malaysia; to some extent, it is also rather adopted in neighboring Thailand. One applied the UTAUT model to deduce the main predictors and concluded that the performance expectancy, effort expectancy, and social influence were the main predictors of the intention to use a robo-advisor for making investment decisions into mutual funds amongst the Indonesian population, aged from 18 to 29 (Permatasari et al., 2023). On the other hand, from the same research, there is a statement on facilitating conditions that has no substantial effect on the intention toward using the digital advisor (Permatasari and Amalia, 2023).