Robinhood
Is This Your Business?4.2
4.2
Author: Kaitlyn Short
LAST UPDATED: September 21st, 2023
Robinhood opened its doors to investors in 2014, making it a fairly new brokerage firm. The company was started by two Stanford graduates, Vladimir Tenev, and Baiju Bhatt, who began their careers building trading platforms for large financial institutions. This experience led them to a major realization that brokerage firms pay little to nothing to place trades for their investors but still charge up to $10 as commission fees. Thus, Robinhood was created to shake up the industry and democratize access to financial markets. Today, Robinhood offers its traders U.S. securities and charges no commission fees. It mainly caters to millennial investors looking to dip their feet into the market without having to pay high commission fees to their brokerage firms. The company's mission is to empower this new generation of investors and shrink the gap between the "haves" and "have-nots."
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The Good
- Pricing and fees
- Mobile capabilities
- Scheduling feature
Pricing and Fees
Robinhood charges $0 commission fees for its securities. In an industry known for charging up to $10 for securities and requiring $500 to $2,000 account minimums, Robinhood's pricing structure is fairly shocking. The firm's creators believe that there are millions of investors out there who use brokerage firms, place more than 10 trades per month, and yet end up paying thousands in fees each year. Unlike these firms, Robinhood doesn't charge steep fees for placing trades, doesn't have a mandatory account minimum to start a trading account, and doesn't have the same operational costs as other big name brokerage firms. So, they can afford to keep costs low and increase their clients' savings. Existing brokerage firms claim their services, like research and educational tools, are worth the fees they charge their clients. Robinhood disagrees. It believes that millennial investors-its target audience-don't care for paying money for services they may not use or may find inadequate. Instead, young investors tend to look elsewhere for free resources that'll help them make informed decisions.Mobile Capabilities
The firm's trading platform is a mobile app available on android and iOS smartphones and tablets. On the platform, users have access to any of the 5,000+ stocks and ETFs listed on the US stock exchange, meaning the firm doesn't put a limit on the number of stocks users can access at the $0 commission rate. The app's sign up process is fairly straightforward and takes a little time to complete. Users have hailed the app for being easy to use and easy to link their bank accounts to. The app doesn't require a routing number nor does it take days to verify users' bank information. Instead, it uses micro-deposits to validate users' accounts.Scheduling Feature
In addition to its commission-free stocks and ETFs, Robinhood offers scheduled deposits. This is a new feature where users can automatically schedule transfers on a weekly, biweekly, monthly, or quarterly basis. Another one of its new features is its advanced order support tool. Investors can use this feature to enter specific orders as good for the day or good until canceled (GTC). All of these aforementioned perks make Robinhood ideal for investors, especially millennial investors.The Bad
- Limited trading tools
- Looking ahead
Limited Trading Tools
The firm only offers a mobile app trading platform. While great for millennial investors who are always on their smartphones or tablets, this means the brokerage firm doesn't offer advanced trading tools. Usually, only desktop platforms have these advanced features like charting mechanisms and volatility indicators. Without these tools, the firm lacks critical features to help better inform its investors. Speaking of informing users, the firm also doesn't offer additional resources like education materials or research tools. While its creators believe that millennial investors tend to not use these features, we're pretty sure that investors would enjoy the added benefit of having their educational and research resources under one roof since it will save them time and energy from looking elsewhere.Looking Ahead
Robinhood doesn't charge its investors any hidden fees, so for now, its users can rest easy knowing they're truly executing commission free trades. However, in the future, Robinhood may need to change its pricing structure to make money and keep its doors open. Eventually, the firm will charge for premium services if their traders decide to use them. The firm will also begin offering margin trading, which will allow its users to borrow money from the brokerage firm to cover a certain percentage of the securities' costs. The firm will then make money off of the interest rates they'll charge on the loans. Potential clients looking to join Robinhood should be aware of these impending fees. Furthermore, the company only offers stock and ETFs trades. Investors currently cannot trade options, bonds, mutual funds, and other securities. For investors who are interested in investing in a variety of securities to diversify their portfolios and mitigate financial risks, this detail is fairly disappointing. Additionally, the firm doesn't offer ACAT transfers, which means traders cannot transfer their existing brokerage assets into Robinhood. Another major downside to the firm is the fact that it's not the first brokerage firm to try out commission free trades. Zecco was a brokerage firm that implemented this model and had to frequently change its pricing structure because of how difficult it was for the company to stay afloat. Eventually, Zecco gave up, determined the model wasn't successful and instead, merged with TradeKing. This story could dissuade users from joining Robinhood since the firm's business model could be unfeasible in the long run.The Bottom Line
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Ben Webb Orem, UT
The app has a lot of great features but the company itself is shady and has the worst customer service I've dealt with in a long time. They locked my wifes account today and refused to let her withdraw her funds after a transfer was reversed, even though she had enough in her account to cover the transfer reversal. There reason being that the account was locked for "security purposes". The only thing their trying to secure is the interest they collect off floating your cash before depositing it to your account. They have two phone numbers listed, one just says to email them then hangs up on you, the second rings for a little while then goes to a voicemail box asking you to leave a message then stating that they don't check it. They also sell their users trades to high frequency traders and make a TON of money doing it, but can't be bothered creating a web chat or phone line for customer service or let you access your own money.
From an investor standpoint, what they offer is extremely minimal. Candlestick charts for 10 min blocks only, absurd. Very basic charts anyway, No educational resources, very limited news releases, no paper trading, really their only redeeming feature is the cash management. Their trades are also some of the last to go through to be filled, so if you and 10 people from other brokerages put in a limit order at the same time, you're likely to get stiffed because it fills the others first. If you're even a little bit serious about investing, go somewhere else. TD Ameritrade is great, offers no fee trades, options and so much more than what Robinhood offers. If you like the easy mobile app try Webull, again offers the same things and so much more that someone who wants to get serious with investing needs.
5 years ago
