
Robinhood raises $50M - benjlang
http://blog.robinhood.com/news/2015/5/4/onward
======
quan
My experience with Robinhood has been completely negative. I recently worked
on a loan and needed to show the Robinhood transfer to my bank. Since there's
no web interface you can't get the current month printout. There's no phone
number to call, and it took them 3 days to reply to the zendesk ticket only to
say they can't do anything and I have to wait til end of the month. The actual
statement is only available a week after beginning of the month. Never again.
I closed out my account and deleted the app.

~~~
zwtaylor
I agree that a mobile-only interface is just not enough when you're dealing
with something as intricate as investing. They've tried to abstract away the
many layers of paperwork from investing/trading, but it leads to things like
the problems you've had.

I tried Robinhood for a few days and started to feel that it was turning
investing, something that should require significant forethought and research,
into a bit of a toy. The fact that it specifically targets a younger
millennial audience who most likely have no experience investing makes me a
little uneasy.

That's not to say the app isn't well designed and good-looking, but that a
mobile-only app just might not be the best medium for investors.

~~~
INTPnerd
I'm not seeing your point about targeting a younger audience. A great investor
can come from a combination of being self taught and from experience. The
earlier you start the better better chance you have to make mistakes, learn
from them, and get good at it. When you are young, you probably don't have
much money to loose anyway. Not investing until you are older, and have a
substantial savings is when lots of money really gets lost or else they are
completely depended on financial advisers, but still not knowing which of them
to really trust.

~~~
zwtaylor
I'm not at all suggesting that young people shouldn't be investing, just that
the interface and experience of Robinhood makes investing seem more like a toy
or game than a discipline that requires a lot more than a few swipes and a
tap.

Developing a relationship with investing when you're young is a great thing to
do, but Robinhood might not be the best gateway. I am interested in seeing
where the app goes, as the design by itself is very well done.

~~~
7Figures2Commas
I think Robinhood is a good example of how you can develop a seemingly great
user experience based on a bad business case.

When you consider that the average young, inexperienced investor is going to
come out on the short of the stick by "trading" frequently, Robinhood's zero
commission value proposition is quite weak. In my opinion, a young investor
would be much better off signing up for an account at say, Fidelity, where
they get access to a good deal of research and can buy and sell 70 iShares
ETFs commission-free.

Furthermore, Robinhood's stated target market ("millennials") is an odd one
for a company seeking to monetize via margin. I'd venture a guess that most of
the investors in this market don't even know what margin is, and the vast
majority who do have no business using margin if they can even meet the
minimum equity requirement to set up a margin account. If Robinhood is banking
on establishing a relationship with young investors, this is naive. Whales
will _always_ take their money elsewhere and I doubt that Robinhood will ever
be able to compete with folks like Interactive Brokers, OptionsHouse, etc. for
the big-balance margin accounts.

The fact that Robinhood is already expanding to Australia, which has a
population of less than 25 million and where annual trading volume is
significantly lower than the US, is telling.

~~~
vasilipupkin
I think you hatin on the company is unwarranted. Millions of people already
trade stock. Given that they do, they are better off paying less for it than
more. Investors who trade infrequently and trade something like SPY also
benefit because they get lower fees and, hopefully, they don't need brick and
mortar support. "Whales will always take their money elsewhere" \- why ? Why
do "whales" want to pay more for their trades. I am not saying Robinhood is
the second coming of Jesus, but I don't see any good reason for hatin' on the
company, the way you do

~~~
7Figures2Commas
First, I am not "hatin" on Robinhood. I don't believe the company's value
proposition is very compelling, particularly for its target market, and I
explained in detail why.

Second, you are making some flawed assumptions about what's best for
investors. In terms of transaction costs, to save a meaningful amount, you
need to be making a meaningful number of trades. As I noted, other brokerages,
like Fidelity, offer access to commission-free products that are appropriate
for average investors, so in some cases Robinhood offers _no_ savings.

Beyond transaction costs, the average investor does not benefit from engaging
in frequent trading and stock picking. Saying you saved $200/year on
transaction costs doesn't mean much when your portfolio performance lags the
market. The average investor will do better with reasonable diversification
and a sensible buy-and-hold strategy than he or she will trading in and out of
individual issues because there's no commission.

Regarding whales, at Interactive Brokers, for instance, you can pay as little
as 0.5% over the benchmark rate on margin balances and a fixed rate commission
of $0.005 per share per trade. Do the math. Robinhood will never realistically
be able to compete on cost for that segment of the market.

As I wrote, I think Robinhood's entry into a market that is substantially
smaller than the US at this early juncture is a telling indication of its
prospects in the US.

~~~
vasilipupkin
I don't think the entry into Australia is a negative, the way you describe it.
Australian fees are much higher than in the US, so it's a great value
proposition there. So why not offer the service there as well ?

I agree that people shouldn't trade a lot. This is besides the point. People
shouldn't eat a lot of burgers, either. Given that people do trade a lot,
though, it adds a lot of value to reduce the cost of that trading. Some people
trade a lot for fun, knowing that they shouldn't, if they wanted to maximize
return.

As far as Fidelity or Vanguard or others offering commission-free products,
how is it bad to have MORE of such products out there ? It's just competition.
The devil of the value add is in the exact terms and details.

I don't see your negativity as warranted

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soldergenie
From what I can see, the only way they differentiate themselves from their
well established competitors is by not charging commissions. Yet I don't see
how their costs of running a brokerage would be lower than their competitors,
and they don't seem to have any revenue streams their competitors don't also
have. So how will they eventually be profitable? Discount brokerage isn't an
especially profitable industry to begin with

Competing on price alone doesn't seem like a good strategy to creating a
valuable company.

~~~
PublicEnemy111
I was coming here to say exactly that.

from: [http://techcrunch.com/2015/05/07/free-stock-
trades/](http://techcrunch.com/2015/05/07/free-stock-trades/) > Tenev says
Robinhood is charging a 3.5% fee to trade on margin in a private beta of the
feature

It looks like they're planning to monetize via margin. That would work great
if the economy was perpetually in an upswing... but I don't think they would
have survived in the great recession.

Not to mention the irony of Robinhood making margin calls.

~~~
this_user
They are likely also making money by selling the customer's order flow to
large institutions/HFT firms who will happily pay significant sums for this.
This is something most other retail brokers are also doing and have been doing
for a while. The result is that you as the customer are paying indirectly by
getting screwed on your fills.

[http://en.wikipedia.org/wiki/Payment_for_order_flow](http://en.wikipedia.org/wiki/Payment_for_order_flow)
[http://blogs.wsj.com/moneybeat/2014/06/13/payments-to-big-
br...](http://blogs.wsj.com/moneybeat/2014/06/13/payments-to-big-brokers-
under-fresh-scrutiny/)

~~~
nlh
I wonder what the actual implications of "getting screwed on fills" really
are.

If I'm buying AAPL as a casual retail consumer, and the market price at the
absolute moment is $121.05, and I get "screwed" with a fill of $121.06, is
that really a big deal? Especially considering that a few seconds later the
true market price could jump in either direction?

As a professional trader who's head is in the moment, sure, that seems bad.
But does it REALLY matter for a casual long-term investor? My hunch is no. (I
know I couldn't care less if I pay a few pennies more or less - I'm not using
Robinhood for day trading, and that's not the point or their pitch.)

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shitlord
I wish they had an Android app. Hopefully, it's in the works, because I would
definitely try it out.

~~~
JDiculous
I have an Android, and I'm more eager to get the web app. I'm typically in
front of a computer during market hours, so I'd rather not have to whip out my
phone just to make a trade (especially if I'm day-trading). It's faster and
more efficient. I wonder why it's taking so long to make the web app.

~~~
kasey_junk
This is pure speculation on my part and I have no basis for saying it so take
it with a gigantic grain of salt. It is important to remember when someone
offers you a free service you are NOT their customer. So you need to determine
who is the customer.

In this case the obvious, though maybe not correct, inference is that their
customer is the order execution companies that they are selling their order
flow to. If that is the case, it is in robinhoods best interest to make that
order flow as "dumb" as possible such that it doesn't make order volume go
down.

It might be that it is a tactical decision not to provide high fidelity
trading interfaces (via the web or otherwise) because those make their product
(you) less valuable to their customer (the order routers).

Again, purely speculation, but it seems a reasonable hypothesis.

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Ryel
Maybe they can use some of that $50M to fix their broken password recovery.

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physcab
I love Robinhood because it has made trading so accessible to me. I started
out by putting in $100 and as I gained confidence and started doing more
research, I started adding more funds. I've tried many services in the past -
Schwab, ETrade, Scottrade, and they all felt a bit too "heavy-weight" for me.
I don't have significant amounts of income invested, I just want something low
friction that I can use as a learning tool. I have friends who are more
"serious" investors and they don't use Robinhood, but I see Robinhood
satisfying a different use case at the moment.

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dataker
It's quite interesting they're moving to Australia after the US.

Usually, companies goes to EU first while moving overseas, but it appears it's
becoming more and more bureaucratic, so why spend its limited resources?

~~~
semerda
Australia is a financially savvy market. Most people I know there trade stock
and have at least 1 investment property. Great move by Robinhood!

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quotha
This company is going to put serious pressure on the pretty high commissions
that the discount brokers are currently enjoying.

~~~
nemo44x
But first they will need to offer a few more things:

    
    
      -Ability to set limits and stop losses
      -Ability to use margin
      -Ability to buy and sell call and put options
      -Ability to trade after hours
      -Ability to short (likely comes with margin)
      -Ability to set trailing losses
      -A better UI
      -Ability to analyze trades and examine bid/ask spreads
    

I used Robin Hood a few months back and possibly it has gotten better and I'm
sure the overall experience will get better. But since that experiment I
cashed out of that account and just use my online brokerage account.

I do look forward to a better experience down the road.

~~~
kolencherry
Stop loss, stop limit, GTC orders were rolled out recently. See below:
[http://blog.robinhood.com/news/2015/4/23/introducing-
robinho...](http://blog.robinhood.com/news/2015/4/23/introducing-robinhood-
for-apple-watch)

They've started that they will be releasing margin trading in 2015.

~~~
nemo44x
Excellent. Might put some money back in it and try it out again.

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semerda
"Stop paying up to $65 for every trade." I am assuming this is in reference to
10K+ trades not the average trade that last time I checked was around $19.

Either way Congrats on the big raise. Good move on focusing next on a
financially savvy market like Australia!

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memossy
Saving $2.4m on $500m traded implies that typical trade < $300.. Looks like
they want to make back the money they lose on margin trading, margins for them
will likely not be that great as a result - a good corollary is spread bet
providers in the UK tbh

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lhnz
When are they coming to the UK?

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humbleMouse
This is sweet. Short term trading with no commission costs? Great.

