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Robinhood strikes me as a complete financial amateur-ish company, trying to attract millennials that don't know better by branding themselves as a cool tech com

Robinhood strikes me as a complete financial amateur-ish company, trying to attract millennials that don't know better by branding themselves as a cool tech company. I have been using Ameritrade for a while and was curious about their no fee platform so gave it a quick go. The graphs have no legends associated in the app. The spreads seems not up-to-date with official quotes, etc. I went back to Ameritrade as fast as possible. They are the "go fast and break things" of finance. There is a good chance that this will not end well.

whoisjuan 8y ago
I have been using Robinhood for years, but I don't disagree at all with this statement. I have always been a little bit suspicious of their approaches. For me the strangest thing about their business is their zero-fee approach. Yes you can make money by getting interest from uninvested funds + premium subscriptions + trade arbitrage, but if it's such a good business why aren't the incumbents taking similar approaches? Contrarians would say that incumbents are just to engrained in their past approaches to actually adopt modern strategies, but I had that extremely hard to believe, especially when one of the incumbents, E-Trade, was the pioneer of online trading. Also, unlike other industries, financial firms are savage. They're not scared to make risky bets and spin-off new businesses and strategies. Their industry is naturally risky, so they have the experience and tenure to make risky bets, without souring stakeholders. I always give Robinhood the benefit of the doubt, because in my day to day I personally can say that it works great. They definitely nailed the Customer Experience. However that doesn't mean that they have an actual viable long-term business, so I prefer to stay reasonably cautious... Time will tell.
- jkqwzsoo 8y ago
  > For me the strangest thing about their business is their zero-fee approach. Yes you can make money by getting interest from uninvested funds + premium subscriptions + trade arbitrage, but if it's such a good business why aren't the incumbents taking similar approaches? They do, they just charge you extra commissions on top of what they make selling order flow, etc, etc. Commissions make up a miniscule portion of income for brokerages. I think that fees a) keep out the "riffraff" and b) brokerages know that it's a zero-sum game to compete on them. Asking this question is like asking why Ally and Goldman Sachs can offer 2% APY savings accounts, but Bank of America and Chase can only offer 0.01% APY. There are similarly low-cost brokerages which offer dangerous products, like $500 intraday futures margin (about 250x leverage), 400:1 leverage on Forex products, or more traditional low-cost stock trades. The difference between $5/trade, $1/trade, and $0/trade isn't that significant in reality.
  - eclipticplane 8y ago
    > I think that fees a) keep out the "riffraff" and b) brokerages know that it's a zero-sum game to compete on them. There are also costs per position per investor. Some services that brokerages have are based on position counts. An investor with 10 shares in 1 stock is cheaper to maintain than an investor with 1 share in 10 stocks. (One example is prospectuses. If you buy a fund, you're entitled to the prospectus to be delivered within a certain amount of time post trade. If you just by 1, 2, 3, then 4 shares of the same fund, you only get one file/document delivered to you.)
ineedasername 8y ago
In their defense, their version of "go fast and break things" won't kill any jaywalkers, and instead could be devastating on a far wider scale, if 2007-2008 collapse showed us anything. (upwards of 10,000 extra suicides there [0] so....) [0] https://www.forbes.com/sites/melaniehaiken/2014/06/12/more-than-10000-suicides-tied-to-economic-crisis-study-says/#85fb2237ae25 https://www.forbes.com/sites/melaniehaiken/2014/06/12/more-t...

whoisjuan 8y ago

I have been using Robinhood for years, but I don't disagree at all with this statement. I have always been a little bit suspicious of their approaches. For me the strangest thing about their business is their zero-fee approach. Yes you can make money by getting interest from uninvested funds + premium subscriptions + trade arbitrage, but if it's such a good business why aren't the incumbents taking similar approaches? Contrarians would say that incumbents are just to engrained in their past approaches to actually adopt modern strategies, but I had that extremely hard to believe, especially when one of the incumbents, E-Trade, was the pioneer of online trading. Also, unlike other industries, financial firms are savage. They're not scared to make risky bets and spin-off new businesses and strategies. Their industry is naturally risky, so they have the experience and tenure to make risky bets, without souring stakeholders. I always give Robinhood the benefit of the doubt, because in my day to day I personally can say that it works great. They definitely nailed the Customer Experience. However that doesn't mean that they have an actual viable long-term business, so I prefer to stay reasonably cautious... Time will tell.

jkqwzsoo 8y ago
> For me the strangest thing about their business is their zero-fee approach. Yes you can make money by getting interest from uninvested funds + premium subscriptions + trade arbitrage, but if it's such a good business why aren't the incumbents taking similar approaches? They do, they just charge you extra commissions on top of what they make selling order flow, etc, etc. Commissions make up a miniscule portion of income for brokerages. I think that fees a) keep out the "riffraff" and b) brokerages know that it's a zero-sum game to compete on them. Asking this question is like asking why Ally and Goldman Sachs can offer 2% APY savings accounts, but Bank of America and Chase can only offer 0.01% APY. There are similarly low-cost brokerages which offer dangerous products, like $500 intraday futures margin (about 250x leverage), 400:1 leverage on Forex products, or more traditional low-cost stock trades. The difference between $5/trade, $1/trade, and $0/trade isn't that significant in reality.
- eclipticplane 8y ago
  > I think that fees a) keep out the "riffraff" and b) brokerages know that it's a zero-sum game to compete on them. There are also costs per position per investor. Some services that brokerages have are based on position counts. An investor with 10 shares in 1 stock is cheaper to maintain than an investor with 1 share in 10 stocks. (One example is prospectuses. If you buy a fund, you're entitled to the prospectus to be delivered within a certain amount of time post trade. If you just by 1, 2, 3, then 4 shares of the same fund, you only get one file/document delivered to you.)

ineedasername 8y ago

In their defense, their version of "go fast and break things" won't kill any jaywalkers, and instead could be devastating on a far wider scale, if 2007-2008 collapse showed us anything. (upwards of 10,000 extra suicides there [0] so....) [0] https://www.forbes.com/sites/melaniehaiken/2014/06/12/more-than-10000-suicides-tied-to-economic-crisis-study-says/#85fb2237ae25 https://www.forbes.com/sites/melaniehaiken/2014/06/12/more-t...