10 ms·

I have a Schwab brokerage account, until recently I could trade OTCs and can still trade warrants and futures. These are riskier securities than common stock. N

I have a Schwab brokerage account, until recently I could trade OTCs and can still trade warrants and futures. These are riskier securities than common stock. None of which is possible on RH as far as I know. When I created my Schwab account I received and was offered no specific training, and largely learned how to trade on YT, Investopedia, and articles. My point is this: RH has become the media's favorite whipping boy because retail trading has seen a spike in popularity not witnessed since the .COM Bubble. A lot of this critique is aimed at RH's interface/app because it is substantially better than the existing brokerages still using websites from the 1990s (this article criticizes it for being "slick" and complains about confetti). The reality is that you can be a risky investor and lose it all on any brokerage, including Schwab, Fidelity, or TDA. RH has made some mistakes and isn't actually a good broker in my opinion, but dog piling them is just a proxy for arguments against retail investors being allowed to invest freely in the market (e.g. I've read multiple arguments for banning options trading for accounts under $25K for one example).

callamdelaney 5y ago
Yes, but Robinhood have taken actions which purposefully harmed its users in order to benefit their corporate customers(Citadel). https://www.independent.co.uk/news/business/robinhood-gamestop-class-action-trading-suspended-b1794934.html https://www.independent.co.uk/news/business/robinhood-gamest...
- eckmLJE 5y ago
  It will be interesting to see if this can be proven. Until then it seems more accurate to simply say that Robinhood took actions that harmed its users and benefited its corporate customers.
- dehrmann 5y ago
  I think Schwab does this, too, and it supposedly gets traders better prices.
- gruez 5y ago
  ...lawsuit alleges.
SmellTheGlove 5y ago
Schwab doesn't have outages during sell-offs of very visible investments, though. Hasn't Robinhood hit the rocks pretty hard during GME and DOGE sell-offs recently? The reason I won't use them is because I don't think I'm their customer - whoever is paying for the order flow is, and I don't trust their platform to be available in the middle of turbulence. EDIT: I get it - Schwab also had visible outages. Sorry for that. Maybe a good time to say I'm a happy Fidelity customer and have been for years :D
- jeffbee 5y ago
  Eh, Schwab regularly has outages. Schwab went down five days in a row during the height of the GameStop stupidity, for example.
- thebean11 5y ago
  Schwab had multiple outages during height of the GME craze.
- Someone1234 5y ago
  > Schwab doesn't have outages during sell-offs of very visible investments, though. Yes they have. During one very red day they were down almost all morning (although StreetSmart Edge worked).
- TuringNYC 5y ago
  As a Schwab customer, I can confidently note there are many outages, especially on volatile market days. Sometimes, you have no idea if an order went through. With e-trade you get a sub-second push notification for trade confirmations, but with Schwab those push notifications come minutes or hours later. Meanwhile, if the website is down, you have no idea what exposure you have.
  - theturtletalks 5y ago
    Yes but are those outages linked to specific stocks/crypto or happen randomly? RH had a major outage on one of the busiest trading days and people were upset but quickly forgiving. What's happened recently is not the same.
ProAm 5y ago
> RH has become the media's favorite whipping boy because retail trading has seen a spike in popularity Because they cant operate as a real brokerage as we saw with GameStop and manipulated the market as a result. I think that is the largest reason they are (rightfully) the whipping boy. They should not be allowed to be a trading platform because of that alone.
- bostik 5y ago
  If "operate as a real brokerage" means that you must have $5B+ of cash tied up at the clearing house, that's a pretty stiff barrier for entry. To be fair, I don't like RH. They are irresponsible, greedy and reckless. They have turned day trading into outright gambling - and quite frankly, if a gambling company gamified their UX the way RH did theirs, the gambling company execs would be rightfully raked over hot coals. Shitting on RH because they had to obey the clearing house rules is intellectual cowardice. Disclosure: I work for a gambling company. And yes, I deal with compliance questions on an almost daily basis.
  - ProAm 5y ago
    > Shitting on RH because they had to obey the clearing house rules is intellectual cowardice. I think if you are going to operate as a brokerage you need to be able to fulfill all types of trades which in turn means you meet the needs of the clearing house, to limit investors to sells when you have funding from someone with a clear interest/holding/shorts (whatever) is a pretty stiff conflict of interest. This is just one of the reasons why they shouldn't be a brokerage. I understand that the clearing house changed the rules, but if you want to play in the game those are the rules. It is pure (even if it was truly non-intentional) market manipulation. They should have stopped all trading if they could not meet the needs of the clearing house (this can be debated as well). And if you cant meet the needs of the clearing house you do not deserve to be a brokerage IMO (I can see how this is also up for debate). I agree your other points about gambling and gamifying, etc.... But the 'you are allowed to only sell and not buy a stock' is so grossly wrong I don't see how anyone can look past that unless you are 1) on the losing side of the coin (the shorts) and want to stop the bleeding or are heavily invested in RH performing a successful IPO.
dehrmann 5y ago
I had to apply to get a margin account and options trading with Schwab. It was a pretty minor barrier, but it's enough to know that you're getting into something risky. The issue with Robinhood is that the slickness of the app encourages risky behavior.
aj7 5y ago
Fidelity gave me an EXAM on options concepts before allowing me to trade them. I made one trade, then realized it’s a casino where the sharks take money from the fish. I reasoned that options trading is a full time job to be successful.
ruggeri 5y ago
I think what you say is true, but I think the public reaction also reflects the disingenuity of Robinhood presenting itself as "democratizing finance," when in reality it seems like they are ambivalent about whether their users are investors or gamblers. As other poster has noted, I think you have to apply on Schwab to trade options. I've never done that.
mustacheemperor 5y ago
Yes, I would be happy to see more of the criticism aimed at Robinhood focus on its more pointed flaws as an actual brokerage. I used it for “fun money” speculating/investing because of the easy interface, but it has repeatedly failed to transfer into my fidelity account. The transfer will succeed partially, leave a ton of margin debt in my fidelity account, and then reverse entirely in a few days. When the transfer does succeed, I still manually need to move the shares from margin holdings to real ownership because you don’t actually own the stocks you hold on robinhood. And Robinhood doesn't do much to make this process easy or well supported because they don’t want you to use another broker anyway. During the GME debacle I decided to close my account and migrate entirely to fidelity and the transfer half-completed like described above, then failed entirely. It seems to me Robinhood was using my money to meet other obligations during a liquidity challenge.
room505 5y ago
The reason Robinhood may have become a whipping boy is because they are only known for trading stocks - that's it. Brokerages like Schwab, Fidelity and TDA are well known companies that not only allow you to trade, but actually administer 401k's, pensions and have financial managers that help you with long-term goals. Sure, they make mistakes, but they're the more mature companies that provide assistance/education in long-term goals. I haven't recognized Robinhood advertise in any TV/internet ads or blogs encouraging "buy and hold" mentality. I see Robinhood as a teenager still growing up. Schwab/Fidelity/TDA are the parents that knows what's best.
deleted 5y ago
[deleted]
CarelessExpert 5y ago
> A lot of this critique is aimed at RH's interface/app because it is substantially better than the existing brokerages still using websites from the 1990s Wow... you really think the criticism is just because RH is better? What, is it jealousy or something? Please. This isn't the case of someone being picked on by a schoolyard bully. RH is in the highly regulated, highly consequential consumer fintech space, and they are clearly gamifying trading. All the subsequent criticisms follow from that fact. If you want to make the claim RH isn't gamifying trading and therefore the criticisms are off base, please, I invite you to do so. But to claim RH is the target of SEC investigations simply because they're good? Come on.
- deleted 5y ago
  [deleted]
- kortilla 5y ago
  > But to claim RH is the target of SEC investigations simply because they're good? Come on. You make it sound like this is outlandish, but it happens nearly every time a disruptive player comes into a heavily regulated market full of old players. It is much easier to cry foul than to deal with the fact that the competition just got hard.
  - CarelessExpert 5y ago
    I guess that explains the SEC settlement where RH paid a large fine for deliberately misrepresenting their use of PFOF (though, as always, they didn't admit to wrongdoing... classic SEC!) I'm sure they're totally squeaky clean aside from that and it's all just a Big Finance conspiracy...
  - splitstud 5y ago
    Robinhood is not competitive whatsoever with the better brokers. Their limited UI and super slow execution won't appeal to anyone who has used a good platform.
- nullspace 5y ago
  > they are clearly gamifying trading. > If you want to make the claim RH isn't gamifying trading and therefore the criticisms are off base, please, I invite you to do so. I have used RobinHood just a little bit, and it's not my main brokerage. However, I take issue with your phrasing. You start with the premise that whatever it is that RobinHood is doing is bad, it's impossible to argue against this where you are standing. I hate the app that my main brokerage provides, but it was even worse before RobinHood existed. When I bought my first set of shares on RH, I was amazed by easy it was, and how well designed the UI was. IIRC, it is also super easy to find information on the stock that you're trading, so it's not like they are making the UI dumb. I have read criticisms like how they make buying a stock seem inconsequential, but that's frankly pretty absurd to me. Do they need to make their UI flow less smooth, or give some big warning that people are dealing with real money? If there are any parts of their app which encourages gambling, I agree it should be removed, but the actual criticisms I read are things like "they use bright flashy lights like slot machines" which seems very unconvincing.
smnrchrds 5y ago
Robin Hood did the equivalent of designing your bleach containers to look like juice boxes. They gamified day trading and made it look fun.
ep103 5y ago
Isn't that a bit like saying the media focuses on sports car crashes, because you can crash in any car, but sports cars are objectively better than other cars?
JKCalhoun 5y ago
FTA: "He felt a surge of excitement every time he saw a green number indicating that one of those stocks had gone up in value." I think that is the issue. There is a tighter feedback loop that amounts to "gamifying" stock trading. It's telling to me that the new investor cited in the article didn't take his dad's $1K, put it into a Vanguard index fund and call it a day. No, very much a day-trader type of customer is drawn to RH. I'm not saying it's bad or good, but that seems to be the difference between RH and your Schwab brokerage.
deleted 5y ago
[deleted]
suifbwish 5y ago
We don’t have a responsibility ethical or otherwise to protect adults from themselves. Any argument to the contrary is an appeal to emotion at best.
- Dah00n 5y ago
  Sure we do. That is why almost everywhere on earth it is illegal to drive a motorcycle without a helmet for example. Laws aren't made just to piss people off or create a thriving helmet industry. They are there to make it harder to fall into the stupidity trap.
LatteLazy 5y ago
I broadly agree, I wouldn't say RH are without blame though. They actively marketed themselves towards the WSB, Yolo, "gambling but on stock" end of the market. That's not the same as pushing misinformation, but it's pretty scummy...
jollybean 5y ago
To be fair, it's also the messaging, marketing and target audience.
agumonkey 5y ago
I wonder how much is by design. Exchanges feel like having a grinder without second handle nor wheel guard. At best you get a little light saying 'warning this is about to get bloody'.
dfxm12 5y ago
Other companies don't have quite the amount of controversies (including a security breach - so we're not just talking about using them as a proxy again retail investing in general) as Robinhood in a similar amount of time: https://en.wikipedia.org/wiki/Robinhood_(company)#Controversies https://en.wikipedia.org/wiki/Robinhood_(company)#Controvers... If Robinhood seems like a whipping boy, it's because they've been earning negative press (like you said, they've made these mistakes) on a regular basis for the past 2.5 years.
_irri 5y ago
Signing up for options trading with Schwab or Fidelity requires filling an application including a survey about derivative products and your experience with each type of offering. Vanguard is even more difficult. Application for a margin account requires mailing in a notarized form. Robinhood makes it easy in order to profit off inept traders that have no business making these types of trades.

callamdelaney 5y ago

Yes, but Robinhood have taken actions which purposefully harmed its users in order to benefit their corporate customers(Citadel). https://www.independent.co.uk/news/business/robinhood-gamestop-class-action-trading-suspended-b1794934.html https://www.independent.co.uk/news/business/robinhood-gamest...

eckmLJE 5y ago
It will be interesting to see if this can be proven. Until then it seems more accurate to simply say that Robinhood took actions that harmed its users and benefited its corporate customers.
dehrmann 5y ago
I think Schwab does this, too, and it supposedly gets traders better prices.
gruez 5y ago
...lawsuit alleges.

SmellTheGlove 5y ago

Schwab doesn't have outages during sell-offs of very visible investments, though. Hasn't Robinhood hit the rocks pretty hard during GME and DOGE sell-offs recently? The reason I won't use them is because I don't think I'm their customer - whoever is paying for the order flow is, and I don't trust their platform to be available in the middle of turbulence. EDIT: I get it - Schwab also had visible outages. Sorry for that. Maybe a good time to say I'm a happy Fidelity customer and have been for years :D

jeffbee 5y ago
Eh, Schwab regularly has outages. Schwab went down five days in a row during the height of the GameStop stupidity, for example.
thebean11 5y ago
Schwab had multiple outages during height of the GME craze.
Someone1234 5y ago
> Schwab doesn't have outages during sell-offs of very visible investments, though. Yes they have. During one very red day they were down almost all morning (although StreetSmart Edge worked).
TuringNYC 5y ago
As a Schwab customer, I can confidently note there are many outages, especially on volatile market days. Sometimes, you have no idea if an order went through. With e-trade you get a sub-second push notification for trade confirmations, but with Schwab those push notifications come minutes or hours later. Meanwhile, if the website is down, you have no idea what exposure you have.
- theturtletalks 5y ago
  Yes but are those outages linked to specific stocks/crypto or happen randomly? RH had a major outage on one of the busiest trading days and people were upset but quickly forgiving. What's happened recently is not the same.

ProAm 5y ago

> RH has become the media's favorite whipping boy because retail trading has seen a spike in popularity Because they cant operate as a real brokerage as we saw with GameStop and manipulated the market as a result. I think that is the largest reason they are (rightfully) the whipping boy. They should not be allowed to be a trading platform because of that alone.

bostik 5y ago
If "operate as a real brokerage" means that you must have $5B+ of cash tied up at the clearing house, that's a pretty stiff barrier for entry. To be fair, I don't like RH. They are irresponsible, greedy and reckless. They have turned day trading into outright gambling - and quite frankly, if a gambling company gamified their UX the way RH did theirs, the gambling company execs would be rightfully raked over hot coals. Shitting on RH because they had to obey the clearing house rules is intellectual cowardice. Disclosure: I work for a gambling company. And yes, I deal with compliance questions on an almost daily basis.
- ProAm 5y ago
  > Shitting on RH because they had to obey the clearing house rules is intellectual cowardice. I think if you are going to operate as a brokerage you need to be able to fulfill all types of trades which in turn means you meet the needs of the clearing house, to limit investors to sells when you have funding from someone with a clear interest/holding/shorts (whatever) is a pretty stiff conflict of interest. This is just one of the reasons why they shouldn't be a brokerage. I understand that the clearing house changed the rules, but if you want to play in the game those are the rules. It is pure (even if it was truly non-intentional) market manipulation. They should have stopped all trading if they could not meet the needs of the clearing house (this can be debated as well). And if you cant meet the needs of the clearing house you do not deserve to be a brokerage IMO (I can see how this is also up for debate). I agree your other points about gambling and gamifying, etc.... But the 'you are allowed to only sell and not buy a stock' is so grossly wrong I don't see how anyone can look past that unless you are 1) on the losing side of the coin (the shorts) and want to stop the bleeding or are heavily invested in RH performing a successful IPO.

dehrmann 5y ago

I had to apply to get a margin account and options trading with Schwab. It was a pretty minor barrier, but it's enough to know that you're getting into something risky. The issue with Robinhood is that the slickness of the app encourages risky behavior.

aj7 5y ago

Fidelity gave me an EXAM on options concepts before allowing me to trade them. I made one trade, then realized it’s a casino where the sharks take money from the fish. I reasoned that options trading is a full time job to be successful.

ruggeri 5y ago

I think what you say is true, but I think the public reaction also reflects the disingenuity of Robinhood presenting itself as "democratizing finance," when in reality it seems like they are ambivalent about whether their users are investors or gamblers. As other poster has noted, I think you have to apply on Schwab to trade options. I've never done that.

mustacheemperor 5y ago

Yes, I would be happy to see more of the criticism aimed at Robinhood focus on its more pointed flaws as an actual brokerage. I used it for “fun money” speculating/investing because of the easy interface, but it has repeatedly failed to transfer into my fidelity account. The transfer will succeed partially, leave a ton of margin debt in my fidelity account, and then reverse entirely in a few days. When the transfer does succeed, I still manually need to move the shares from margin holdings to real ownership because you don’t actually own the stocks you hold on robinhood. And Robinhood doesn't do much to make this process easy or well supported because they don’t want you to use another broker anyway. During the GME debacle I decided to close my account and migrate entirely to fidelity and the transfer half-completed like described above, then failed entirely. It seems to me Robinhood was using my money to meet other obligations during a liquidity challenge.

room505 5y ago

The reason Robinhood may have become a whipping boy is because they are only known for trading stocks - that's it. Brokerages like Schwab, Fidelity and TDA are well known companies that not only allow you to trade, but actually administer 401k's, pensions and have financial managers that help you with long-term goals. Sure, they make mistakes, but they're the more mature companies that provide assistance/education in long-term goals. I haven't recognized Robinhood advertise in any TV/internet ads or blogs encouraging "buy and hold" mentality. I see Robinhood as a teenager still growing up. Schwab/Fidelity/TDA are the parents that knows what's best.

deleted 5y ago

[deleted]

CarelessExpert 5y ago

> A lot of this critique is aimed at RH's interface/app because it is substantially better than the existing brokerages still using websites from the 1990s Wow... you really think the criticism is just because RH is better? What, is it jealousy or something? Please. This isn't the case of someone being picked on by a schoolyard bully. RH is in the highly regulated, highly consequential consumer fintech space, and they are clearly gamifying trading. All the subsequent criticisms follow from that fact. If you want to make the claim RH isn't gamifying trading and therefore the criticisms are off base, please, I invite you to do so. But to claim RH is the target of SEC investigations simply because they're good? Come on.

deleted 5y ago
[deleted]
kortilla 5y ago
> But to claim RH is the target of SEC investigations simply because they're good? Come on. You make it sound like this is outlandish, but it happens nearly every time a disruptive player comes into a heavily regulated market full of old players. It is much easier to cry foul than to deal with the fact that the competition just got hard.
- CarelessExpert 5y ago
  I guess that explains the SEC settlement where RH paid a large fine for deliberately misrepresenting their use of PFOF (though, as always, they didn't admit to wrongdoing... classic SEC!) I'm sure they're totally squeaky clean aside from that and it's all just a Big Finance conspiracy...
- splitstud 5y ago
  Robinhood is not competitive whatsoever with the better brokers. Their limited UI and super slow execution won't appeal to anyone who has used a good platform.
nullspace 5y ago
> they are clearly gamifying trading. > If you want to make the claim RH isn't gamifying trading and therefore the criticisms are off base, please, I invite you to do so. I have used RobinHood just a little bit, and it's not my main brokerage. However, I take issue with your phrasing. You start with the premise that whatever it is that RobinHood is doing is bad, it's impossible to argue against this where you are standing. I hate the app that my main brokerage provides, but it was even worse before RobinHood existed. When I bought my first set of shares on RH, I was amazed by easy it was, and how well designed the UI was. IIRC, it is also super easy to find information on the stock that you're trading, so it's not like they are making the UI dumb. I have read criticisms like how they make buying a stock seem inconsequential, but that's frankly pretty absurd to me. Do they need to make their UI flow less smooth, or give some big warning that people are dealing with real money? If there are any parts of their app which encourages gambling, I agree it should be removed, but the actual criticisms I read are things like "they use bright flashy lights like slot machines" which seems very unconvincing.

smnrchrds 5y ago

Robin Hood did the equivalent of designing your bleach containers to look like juice boxes. They gamified day trading and made it look fun.

ep103 5y ago

Isn't that a bit like saying the media focuses on sports car crashes, because you can crash in any car, but sports cars are objectively better than other cars?

JKCalhoun 5y ago

FTA: "He felt a surge of excitement every time he saw a green number indicating that one of those stocks had gone up in value." I think that is the issue. There is a tighter feedback loop that amounts to "gamifying" stock trading. It's telling to me that the new investor cited in the article didn't take his dad's $1K, put it into a Vanguard index fund and call it a day. No, very much a day-trader type of customer is drawn to RH. I'm not saying it's bad or good, but that seems to be the difference between RH and your Schwab brokerage.

deleted 5y ago

[deleted]

suifbwish 5y ago

We don’t have a responsibility ethical or otherwise to protect adults from themselves. Any argument to the contrary is an appeal to emotion at best.

Dah00n 5y ago
Sure we do. That is why almost everywhere on earth it is illegal to drive a motorcycle without a helmet for example. Laws aren't made just to piss people off or create a thriving helmet industry. They are there to make it harder to fall into the stupidity trap.

LatteLazy 5y ago

I broadly agree, I wouldn't say RH are without blame though. They actively marketed themselves towards the WSB, Yolo, "gambling but on stock" end of the market. That's not the same as pushing misinformation, but it's pretty scummy...

jollybean 5y ago

To be fair, it's also the messaging, marketing and target audience.

agumonkey 5y ago

I wonder how much is by design. Exchanges feel like having a grinder without second handle nor wheel guard. At best you get a little light saying 'warning this is about to get bloody'.

dfxm12 5y ago

Other companies don't have quite the amount of controversies (including a security breach - so we're not just talking about using them as a proxy again retail investing in general) as Robinhood in a similar amount of time: https://en.wikipedia.org/wiki/Robinhood_(company)#Controversies https://en.wikipedia.org/wiki/Robinhood_(company)#Controvers... If Robinhood seems like a whipping boy, it's because they've been earning negative press (like you said, they've made these mistakes) on a regular basis for the past 2.5 years.

_irri 5y ago

Signing up for options trading with Schwab or Fidelity requires filling an application including a survey about derivative products and your experience with each type of offering. Vanguard is even more difficult. Application for a margin account requires mailing in a notarized form. Robinhood makes it easy in order to profit off inept traders that have no business making these types of trades.