And in a lot of cases it is.
But not in something as tightly regulated as banking -- and not when as the Bloomberg piece astutely points out, the "innovation" in question was already done in the 20s before regulation.
It's like crypto Ponzi schemes. People who start them think they are doing something innovative, when really, it's the same "robbing Peter to pay Paul" trick that existed long before Charles Ponzi and his postal reply coupons scam made it a household name. And yet, investors still willingly invest in clear Ponzis, because they are convinced the math will work! The math never works. (To be clear, I think there is a difference between someone like Charles Ponzi and the BitConnect scamsters and the people who invested with Madoff. Madoff was successful for so long, in part because he didn't promise ridiculously outrageous returns. He was running a Ponzi, but what made him so much worse was that it looked legit to investors, whereas most Ponzis offer returns that are never sustainable and look weird to a more savvy investor.)
I'm not implying Robinhood is a Ponzi, btw, but I think what it did here by actively misleading the public is really gross and I've lost all respect for the startup and will never give them a cent -- "free" trades or not.
Oh man, the alt-boom the last half of 2017 was really fun -- provided you didn't put any money into anything!
If not and they lost it - probably not a huge deal if you're playing and know the game.
See GS, 1MDB, AIG, etc.
1. They are doing everything like this (i.e. with not enough legal analysis), and have only just now happened to do something illegal. This would make sense if the top-level people at Robinhood were techbros and not people with experience in finance, but that seems kind of unlikely given that they're able to set up an investment app in the first place - I would assume that's very hard to do if you're not already neck-deep in that industry.
2. They are (for some reason) trying to set this up as a "Robinhood vs The Man (tm)" thing. They're already branding themselves hard on the "Giving financial freedom to the average person" thing, and I could totally see this giving them some free advertisement if they choose to take advantage of the "Big bad government hurting poor people's opportunities!!!" idea.
They are banking (unintentional pun) way too hard on "millennial research" telling them that the '82-'04 crowd wants "a meaningful connection" with their jobs, and apparently, their financial services provider. Maybe this is how they're hoping to relate to them?
The connotations of "Robin Hood" are such that it's a pretty brazen name to pick. Especially so when you consider that it's a VC-funded startup that will almost certainly go to a Too Big To Fail institution when an IPO beckons.
> I need to coin a term for this concept, I see it on every Hacker News thread once it reaches a certain size. It is the attribution of the topic to some nefarious intention of a dude in marketing. Once you start noticing it you can't unsee.
> Intel fires their CEO? It's a PR stunt.
> Startup abandons Europe due to GDPR? PR STUNT!
> AlphaZero beats professionals at Dota 2? You guessed it, it's just PR for oligarchy parent Alphabet.
> I see this so often now it's becoming humorous. As if some how this being all about PR explains everything. It doesn't explain anything! Although I'm sure Bill over in marketing loves that he has subsumed the historical role of deity in explaining the unknown.
The timing was also terrible, right after their big crash earlier in the week. Every single interview addressed that.
Where trust is involved, bad publicity can be worse than no publicity.
One-off press events with negative sentiment typically only affect brands that are getting to be known for the first time.
While a disastrous launch, most people who heard about this Robinhood checking already knew about the app. I don't think it's going to affect their brand much but will have driven app downloads to check it out, or re-acquisition of churned users. Referral events like this end up driving more core activity, which for Robinhood is making more deposits and trades (not signing up for checking).
Robinhood got a lot of press from this, well beyond their existing target market.
The fact that they announced this before confirming it with regulators smacks of CEO arrogance in the "Funding Secured!" vein.
From my comment:
>One-off press events with negative sentiment typically only affect brands that are getting to be known for the first time.
Furthermore, this fits into their narrative of disruption. Their target audience will likely see this as, "stupid big banking industry trying to make it hard for them again."
Because not only will I not use them for this, I closed my account entirely 'cause this is the sign of a disreputable company.
I wouldn't be surprised to find out that's a lie.
That's a pretty small target audience, and those people are heavy into crypto and gold. Robinhood needs customer growth, and a nice, safe interest-bearing chequing account would have been a good way of doing it.
In contrast, for LMCU:
Maximum of $15,000 for the 3% interest rate, most people with houses and/or families are going to want to have an emergency fund greater than $15,000, I spent almost $10,000 on emergency house repairs a couple weeks ago. If you're saving for a major purchase (car, down payment on house, major purchase, etc.) you're probably going to have more than $15,000. There is ZERO interest paid over $15,000!!!
The following are required to earn the 3% interest:
Direct deposit (self employed need not apply)
Minimum 10 debit card purchases per month (this alone should be a dealbreaker, one should almost always be using a credit card over a debit card if you're going to use plastic)
Minimum 4 logins to home banking per month
You're only getting an extra $12.50 a month over if you're keeping $15,000 in an Ally or Discover Savings account, and if you spend a modest $500/month on your debit card you're leaving at least $10 on the table in credit card cash back, not to mention the other benefits that come with using a credit card (extended warranty, price protection, purchase protection, travel insurance, etc. - depending on your card)
I use a credit card and then pay it off with the money in my LMCU checking account, the day after the interest hits :) I only do the minimum number of transactions with the debit card and I use them on low cost purchases.
>You're only getting an extra $12.50 a month over if you're keeping $15,000 in an Ally or Discover Savings account
Savings accounts have restrictions on the amount of times you can move money in and out of them. Checking accounts do not have that restriction. I'm sure I could find a savings account with better interest, but in my current life position I need a checking account.
I am unemployed right now, but I am meeting the direct deposit requirement with my monthly dividend from a stock I own, O. They also accept things like transfers from PayPal towards the direct deposit requirement.
If I were instead a homeowner with a family, I could get my spouse to make a separate checking account to double up on the amount emergency reserve money kept in a checking account. But again, it makes way more sense for emergency reserve money to be kept in a savings account. That's what they're made for.
IM(potentially uninformed)O, if your family is keeping more than $30K in a checking account, then you should probably be investing in stocks or bonds or mutual funds at that point anyways. It's not like you can't sell off investments to pay for emergency costs.
>IM(potentially uninformed)O, if your family is keeping more than $30K in a checking account, then you should probably be investing in stocks or bonds or mutual funds at that point anyways. It's not like you can't sell off investments to pay for emergency costs.
Emergency fund should not be invested! It needs to be in a liquid account that has zero (or near zero) risk to the principal. How big your emergency fund should be is dependent on your life situation. You're most likely to need your emergency fund at the same time the market tanked. I'm not selling securities (maybe at a loss) when I have an emergency, I'm going to use the money I've already set aside for such an occasion.
>Financial advisers view an investment strategy as a pyramid. A strong base is fundamentally important to support the levels of risk an investor bears as securities with varying levels of volatility layer over the foundation. Before an individual ventures into intermediate- or long-term investment vehicles, the establishment of an emergency fund is recommended as the first step toward creating stability and minimizing risk. Stashing three or even six months’ income in a highly liquid account, such as a money market, should preclude the purchase of any instrument that holds risk to principal or requires lock-in periods during which penalties are assessed for early withdrawal. As more volatile securities sit atop above the base of savings accounts or Treasury bills, overall portfolio volatility is minimized and necessary access to risk-free capital is optimized.
What possible benefit could LMCU receive if you log in four times a month instead of just the one time to pay off your credit card? There is none, it's a dark pattern.
I don't login to pay off my credit card, that's set up to happen automatically on the credit card company's side.
I basically just login to see if I've done 10 transactions yet. If I've met that but haven't logged in enough, I'll just logout and login real quick until that part is done. It's really not that big of a deal.
The benefit LMCU could receive from requiring monthly logins is:
- Not having to pay interest to a dead person
- Potentially being the institution you go to when you need a loan. This is where they (and other financial institutions) really make their money. In this respect, it's in their best interest to be with the customer as they become more financially savvy.
A lawyer can't really tell you what will happen in a novel situation. They can speak with great confidence about legal precedents and where the law is black and white, but once you start walking into the grey areas, where the law isn't clear and there is no precedent, the law isn't a computer program interpreted by machines. There's a whole layer of human judgement in deciding what happens in that case, you don't just overflow onto the stack and get to rewrite the legal code to suit your needs.
So when a lawyer says something like, "Ahh, but the law only talks about 'checking accounts' and 'savings accounts' not 'checking & savings accounts'", at best they are giving you a preview of the argument they will make to a judge or jury at your trial.
Then future lawyers will be able to refer back to the precedents set in your court case with more confidence.
In other words, "this hasn't been tested in court" doesn't excuse them from apparently not bothering to get an opinion from the regulators who have the potential to greatly embarrass them after a high-profile product launch.
"This language doesn't directly violate the rules, and hasn't seen a court case. But it looks like an unsubtle attempt to bypass those rules and a big announcement using this approach is at minimum likely to draw some unfriendly scrutiny."
The law isn't a computer, and regulators - especially in financial spaces - have substantially more freedom than courts to simply reject loopholes. Things like structuring rules are essentially "laws against circumventing the law" for exactly this reason. I'm pretty surprised that Robinhood either didn't get a warning about how poorly this could go, or chose to ignore it.
Regulators have strictly less power than courts here when applying existing law and regulation, though they can write new regulations (but not law).
I guess it's a matter of terminology, but I think there are at least some cases where this isn't true. Ex post facto legislation is permitted in civil law, but it's not something courts can generate in response to a case.
Regulators operating under administrative law can create ex post facto rules wholesale if granted express permission by Congress, which is of course new regulation. But even without that grant, they can create limited retroactive rulings when new interpretations are offered during adjudication.  We can debate whether that's 'new regulation' or 'new interpretations of old regulation', but the net result is that regulators are empowered to cover unforeseen circumstances in ways that direct lawsuits are unlikely to offer.
(I am not a lawyer, but...) a move like this looks like an invitation for a Chenery II action, if one is was even needed. The SIPC didn't want to issue brokerage-account protections for a "Checking & Savings Account", and whatever the SEC said to Robinhood produced a very swift change of tune. I suspect it was something like "if we go into adjudication and say magic ampersands don't change your issuing rights, every court in the country will back us up".
I'm not a lawyer, but that line of reasoning sounds like something out of a comedy skit.
"Sure, the law regulates sales of alcohol and sales of firearms, but it doesn't say anything about an Alcohol And Firearms Combo Pack™!"
But there are many types of lawyers in this world. Besides the obvious professional divisions -- real estate vs patent law, trial law vs contract law, etc etc -- you have lawyers who advise their clients versus lawyers who assist their clients. The former are the kind you want, who will tell you what to do to keep everything above board; the latter view it as their job to help you do whatever it is you wanted to do, with the thinnest veneer of "obeying" the "law".
It "works" insomuch as you don't come under scrutiny and your lawyer's legal theories are never tested at trial; a lot of the people making use of this sort of lawyer will rarely if ever actually go to trial -- they'll drag things out until their opponents eventually settle.
For me it's actually hilarious. The follow-up response letter from the founders group is hilarious. If , robinhood did have a legal team to audit this new tool, they suck ass. They probably made a couple hundo thousand a pop, didnt do any work, and they are now living their lives just a tad richer.
edit: Doh.. I guess I just got caught commenting without reading the article. Sorry everybody!
There is a lot of confusion about what Robinhood’s thing is. Delightfully, it is called “Robinhood Checking & Savings,” apparently because calling it a “checking account” or a “savings account” would come too close to implying that it is a real bank account insured by the Federal Deposit Insurance Corp., while “checking & savings” is not a thing and so does not carry that implication. A magic ampersand!
The intent. The SIPC will insure the funds if their purpose is to be exchanged for securities as some point.
> Funds are invested to be able to get that 3% return.
If they are, then they are not insured either. SIPC doesn't insure bad investment decision, thus if the 3% return fail, you would lose money.
The SIPC protect the cash that is stored there which you are going to invest at some point. Let say you put 1000$ there and you invest 200$, it's alright, theses 800$ are protected whatever happens, but if you put 1000$ there but wasn't planning to invest anything, then it's not alright and this is the issue. It's mostly a semantic point, but that semantic is what make it manageable for the SIPC.
The reason why people move cash into a brokerage account is because they intend to invest it at some point in future.
If I intend to invest my coverage limit amount at some point in future but for now I'm using it as a place to dump my cash into and use it as a DDA, i absolutely fall under that umbrella.
The reason why SIPC is having a fit is because someone who is supposed to be fleecing the retail clients is also planning on fleecing those those business is fleecing retail clients.
This is the problem. Robinhood is marketing the product to people who have no intention of investing.
You're taking a very conspiracy-theory view of the situation. If there were an agenda to maliciously over-regulate Robinhood, it could have been executed well before this point. The fact is that Robinhood was trying to introduce a novel product that doesn't neatly fall into pre-existing categories that benefit from insurance protection. (It's great they're trying this-- I hope it succeeds!) But they appear to have done this without contacting SIPC. Had they done so up front (as they're now doing) they probably could have massaged the marketing and legal details appropriately (as I expect they will do).
Like a regular savings account, a money market account at a bank is insured by the Federal Deposit Insurance Corporation (FDIC)...
Where they are not insured is in a Brokerage firm, like Robinhood.
“Checking” accounts are regulated. “Savings” accounts are regulated. “Checking & Savings” accounts are not a thing and thus could be considered a grey area.
The ampersand magically gets you out of regulation.
Well, it DIDN’T, but that was the theory it seems.
> Robinhood can’t issue a “checking account,” or a “savings account,” since those are things only banks can do, but “checking & savings” is technically neither of those things and so perhaps it falls into a gray area. “A magic ampersand,” I called it.
As we hear repeatedly on HN from Google's Dragonfly apologists, it's perfectly normal to keep the legal department out of the loop in modern-day "disruptive" businesses.
Man I can't wait to be done with the banking cartel!
> One possible explanation for the regulatory efficiency here is that so many of fintech’s financial innovations have been tried before. Robinhood was certainly not the first non-bank to get the bright idea of pretending to be a bank and taking deposits!
> In many areas of “tech,” companies are racing to do things—in virtual reality, in artificial intelligence, in surveillance and data collection—that have genuinely never been done before and that pose novel social and regulatory challenges. In many areas of fintech, though, companies are racing to do things that were done in the 1920s, before modern financial regulation came into effect, only this time with an app. The regulators know how to handle that.
: here, he also links to other analysis by him around the same time: https://www.bloomberg.com/opinion/articles/2016-06-17/blockc...
I just discovered his writing recently, and he publishes a daily newsletter that's, more often than not, all of funny, interesting, and informative. I haven't gone back to the archives, but the day-to-day is terrfic:
It doesn't make sense even as a growth hack, because they already have millions of users, it's not like without this, they will not be able to acquire more users. My reaction was, "What were they thinking"?
I guess maybe but if they sort of try to squeak by using signed up users who signed up in a period where there was bad data out there and don't go out of their way to correct what they told them.... I gotta think there is very real legal risk there.
As I've mentioned previously in another thread, this is clearly a gamble. When you're on the VC track to justify $4b+ valuations, taking gambles is par for the course.
I just see bringing those customers along after putting out information that could be seen as deceptive / was deleted and already called into question info a recipe for legal and regulator ... pounding.
Silly social media stuff is one thing, but financial stuff where you rope in users with stuff that sounds like "bank" but isn't. Whole mess of folks out there with serious legal tools to come down on you, and a lot eager to do so.
This just seems unusually risky.
The “personal financial independence” crowd avoids this stuff like the plague, although seemingly ironic, those crowds primarily cater to people that lack the most basic understanding of a bank account who need to repair and control horrible financial situations
They are steered clear from capital markets, aside from managed ETFs and retirement plans
But add .25% interest rate improvement in a bank account and these people will salivate over it
Robinhood going above competitors, even at the expense of going above market rate, would have gotten there attention
They would park their money in that account and have easy access to stocks and cryptocurrencies, allowing Robinhood to continue their big data/market sentiment/payment for order flow selling business with greater efficacy
A guy was telling me I could do that with just $10m a few years ago, just go and buy some small bank and there would be deposit capital to invest.
Surely the thought must have crossed their minds to become a bank?
Starting a restaurant? You've got a 21% chance of failure in the first year.
You've started a bank? Congratulations, you can now lend money you don't even have and earn interest on it. You have joined the club of 7,053 FDIC insured institutions of which about 0.25% fail per year.
The 0.25% failure rate sounds like an under-estimate. I would guess that most banks are simply acquired by bigger ones before they're formally declared "insolvent".
Which, I presume, is only done by paying lawyers to work for a decent length of time. Hence the money+time.
For example, you have to maintain a fraction of your total deposits in a cash account. That means that if RH becomes a wild success story, they may have to keep millions or even billions worth of cash stack.
I believe there are many other requirements that are not easy to satisfy when you're a small nimble startup.
Personally I hope the banking industry in the US gets disrupted, right now it's a dinosaur and consumers suffer.
However, with the current legal framework that doesn't seem easy.
Seems like RobinHood was trying to disrupt banks and then the big boys (SIPC) shut them down fast.
a smaller bank has less complicated products and requirements. Also of course less legacy.
What is hard keeping a fraction of not-your-money in a cash account?
if banking is needed, most startups will partner with a bank instead, so it has access to all of its cash, even if it has to pay a bit more to do so. flexibility has value (which is the same reason options have value beyond the underlying asset).
Is depositing money hard or something? Is spending money using a debit card online difficult?
Because those two things are the primary purpose of consumer banking.
Looked at bank fees recently?
Why should it cost $50 to change some values in a database?
What $50 fees are you talking about? I’m assuming you mean interbank transfers ?
On a side note I now understand the popularity of apps like venmo considering the environment they are in.
The difference here is Robinhood was offering a 3% interest rate without a balance limit, without any minimums or minimum activities (direct deposits, debit card purchases). That interest rate with no requirements was the selling point, nobody else offers that.
Source: It happened to me, I have fine credit, I don't daytrade (I'm an index investor for 95% of my investments), don't rapidly move money in/out, don't exploit interest-bearing accounts like weirdos do on various sites, and I have no idea what the hell the problem was. They still won't tell me anything beyond "We don't want your business."
You should try to figure out where you're getting flagged because if it's a problem at Fidelity it's only a matter of time before you get the same flag from other financial institutions.
Also, there is some irony in you telling me to figure out why I am getting flagged while also telling me I can't be told what it is.
Can you elaborate on what "weirdos" do to exploit interest-bearing accounts?
Its one of the very few financial blogs that doesn't do credit card referrals, thus they don't try to steer their readers to any specific financial products or using any particular links that are less attractive than other ones available but earns them commission.
Bankrate (and others) shouldn't be used, because of the following (directly from their site):
>Bankrate.com is an independent, advertising-supported publisher and comparison service. Bankrate is compensated in exchange for featured placement of sponsored products and services, or your clicking on links posted on this website. This compensation may impact how, where and in what order products appear. Bankrate.com does not include all companies or all available products.
No minimum balances
No minimum debit card purchases
No minimum direct deposits
No minimum bill pays
Free wire transfers
ATM fee reimbursements (If you pay $2 to the ATM owner to take out money, you'll see a $2 credit on your account immediately)
No limit to ATM fee reimbursements
Paycheck posts a day early (not advertised, but that's been my experience)
It's obviously a loss leader to encourage you to use their brokerage offerings, but no brokerage account is required to open the account.
The only other companies that offer products that are comparable is Schwab (which is another brokerage), and USAA (whose membership is limited to military, veterans, and immediate family)
When I brought it to the founders attention they blew it off so I immediately told them that I'm rolling off the project. I'm all for disrupting the industry, but not at the expense of knowingly putting your customers in harms way.
Yes. Come on, a fake bank?
The ICO industry is the penny-stock market, but with "blockchain". Some of the same suspects, too.
High Reward =~ High Risk...
If you can call 3% high...
In short, finance professionals looking for reliable 3% annual returns could no longer count on US treasuries to help get them there so they turned to securitized mortgages.
The core issue is that there is no way right now to provide savers with a 3% risk free interest rate. 1 year treasuries for e.g are at a 2.7% yield and that assumes you lock up your money for a year. Basically, their "novel" idea was to supplement the rate they would theoretically be getting from investing your money in t-bills with interchange revenue. But the interchange revenue wouldn't be a sure thing. It depends on the behavior of the customer. This in turn means that they would have to just pay depositors out from their VC money until they attract that type of customer that could support their interchange revenue assumptions.
There is a good reason that ideas like this are strictly regulated. If I could just set up a company and promise main street investors a guaranteed return based on my rosy view of the world, a lot of people could end up hurt. I'd be shocked if the product, after they finally launch it, offers any of the features that attracted people to the offering in the first place.
To me, the 3% is not that interesting. 3% is chump change, 3k on 100k.. who cares? Most Americans don't even have 400 bucks in any of their accounts. I don't think most people are going to sign up with a bank for 10 bucks extra per year. Usually much less than that.
Everytime you make a trade, Robinhood sells that trade to a market maker. Robin hood charges more money for forwarding this trade than most other brokers. To make up for this increased cost to market makers, they then pass the cost to you by charging more money for the trade.
This is akin to restaurants that claim you get free delivery. You don't really get free delivery. They just increased the price of the food.
Looks like they were trying to play a similar game with that 3% savings account by claiming your money was risk-free when it really wasn't.
If you place a limit order at a given price, you will get that price or better, period. Just as you would at any other retail brokerage. At any other retail brokerage you will get charged fees as well. It is structurally impossible (modulo odd lot requirements that are unlikely to affect you unless you are buying extremely thinly traded stocks) for the price to pass you by while your limit order is active -- if you want to buy at $100, nobody in the US, retail or institutional, trading on any regulated market, will get executed at a better price than $100 while your order is active.
For market orders it is more complex, but you will never do worse than picking up the best price available. Yes, you will cross the spread; market orders are always taking orders, but at any retail brokerage you will also cross the spread, in addition to paying fees.
All retail brokerages eat price improvement above the executed price, and Robinhood is no different except that they don't charge you fees on top of that. Retail flow is by far the most valuable to wholesale market makers; they pay through the teeth for it, but regulation does not permit Robinhood to front run its customers.
 There is, of course, no such thing as a free lunch -- your lunch is being paid for by the wholesale market makers and the dark pools of liquidity. More specifically, you are paying for your lunch by expressing a liquidity preference.
This gets brought up in every thread about Robinhood and is simply wrong. Check out this explanation of Robinhood's business model: https://www.bloomberg.com/opinion/articles/2018-10-16/carl-i...
I wonder whether the fact that Robinhood doesn't internalise its trades (i.e., capitalise on the bid/ask spread by matching buyers/sellers from their own customer base) is the reason why market makers pay more to Robinhood?
Toxic flow would be something like a huge institution that just keeps buying a stock they like. Once the market maker has sold them a few portions, he realises the price has moved against them.
With a bunch of little guys the MM combines:
- Benefit from the two-way nature of the flow. Some little guys are buying, some selling.
- Hedge against other pools of liquidity. Either find a similar stock (stocks are highly correlated) to sell, or an index.
- Hold on to the risk until it relaxes and goes the other way.
Ex MM / HFT guy.
The answer varies for small and large orders (and even by share price) For most retail investors that use something like Robinhood, the average order size is small so a flat $5 fee would be way worse.
No, you aren't. This is effectively illegal if you think frontrunning is occurring.
> Everytime you make a trade, Robinhood sells that trade to a market maker.
This is true about almost every single discount broker you would use in place of Robinhood.
In the past, I have seen small mom-and-pop brick-and-mortar 'finance groups' pop up which promise to give you much better returns than the markets based on investing in some 'magical fund'. Such groups then take your money and for a while the going is good until Government halts them and then overnight these 'money mills' are gone and your money is stuck as is money of other folks with tax authorities taking action against the customers who had no idea. And the way these operations are setup and run, folks running these money mills get off scotch free only to shy away for few years until they come back again with yet another 'idea'.
If you follow the money trail, it eventually bottoms out with the same musical chairs of people making the same tired business moves with overt and deliberate goals to manipulate people into product lock in before changing terms to be unfavorable.
Most start-ups, even fancy seeming ones backed by sexy VCs where you think, surely this one must be genuinely innovating in some way, are just the same centuries old bureaucratic anti-consumer bullshit, just dressed up with a sleek infinite scroll and using hashtags and the word lolz on the webpage.
Act 1: Checking available to everyone!
Several days later...
Act 2: Sorry, no more.
1. announcing the thingy
2. gather emails of people interested in it 
3. Sorry, not going to happen...
 and possibly interested in other products ...
If Robinhood manages to get away with saying "It's not a bank account; it just does everything a bank account does", and therefore that it doesn't require the same level of regulation, then that's going to be a HUGE problem.
When it comes to money and ensuring people manage mine correctly and honestly, I’ll take safety over innovation thank you very much. Feel free to continue “disrupting” low stakes stuff like juicers and scooters. Call me old fashioned.
Monzo spent a long time as a card provider only, while working to obtain their licence. Revolut has been operating for years and only just got their European banking licence four days ago.
Other UK bank newcomers have bought smaller, established banks just for the licence; Aldermore bought Ruffler Bank mostly for its licence.
It seems that this is an area new companies feel is ripe for disruption.
The difference is SoFi Money claims to plan to offer 1% less interest than Robinhood claims to offer, also SoFi Money claims to plan to be FDIC insured.
Looks like they offered it to people who already are "SoFi Members" first.
Also, please don't use HN primarily for ideological battle. That's destructive of the purpose of this site.
Robinhood is what Moviepass rebranded as a hip fintech startup that provides trading services would look like. They target the financially illiterate, and should be nuked from orbit.
If a few dollars per trade are breaking you, you have no business actively trading (and should have at least $25k in working capital per FINRA pattern day trading guidelines ). Put your money in an index fund at Vanguard and stop gambling in what is a glorified loot box at Robinhood user scale.
What? $5-$10 for a stock purchase? If you are purchasing such a small amount that the fee is > 0.1 % you should not be trading stocks. (In general you shouldn't.)
A single stock of Amazon costs just over $1500. That is more than the monthly rent a poor person pays. If they want Amazon in their portfolio, they can pick a mutual fund that includes it, and they wouldn't have to shell out anywhere near $1500.
As an aside, I find the argument that "this will help the poor" really disingenuous when you consider that the poor are the first ones blamed when things go awry. Remember 2008, when the crisis happened because "the poor were given houses they couldn't afford?"
Companies like Robinhood are not looking after the poor.
The solution to poor people not having enough money to invest is to get them more money.
If you are a very sophisticated investor (and I bet some people on this forum are) maybe that works. But in general people who trade stocks for themselves at home take a bath.
I hope RH grows with its customers, otherwise it'll eventually be outgrown by them. One of the most obvious and biggest disruptions that still hasn't happened is to let you set a custom portfolio on autopilot. At the end of the day that's what anyone should want.
Can't you invest in a set of 5 passive ETFs and forget about it for 40 years? Or even build your own ETFs for that purpose: https://www.motif.com? Or are you talking about "if risk of market crash is too high, sell everything for a bit -- buy back in when this calms down" type stuff?
If somebody wants to disrupt, quant hedge fund for retail investors would be the one but I suspect it's never going to happen because of the perverse incentives that exist to not do that. There used to be the Quantopian-Robinhood method but neither side wanted to go in the direction. I don't see these firms as truly disruptive.
Long experience has taught that those basic ideas
are mostly good, but have some problems, and a
regulatory system has been built to remember and
address the problems. If you borrow short to lend
long you’ll want deposit insurance; if you sell
shares of a thing you’ll need to give buyers some
disclosure; if you trade derivatives you should
make sure your counterparties understand them; etc.
It seems deceptively simple and cheap at first to pass a law or engineer a mechanism to protect us from something. But that should be weighed with the long-term cost and risk of the regulation/mechanism going out of date. It's a lot harder to get rid of it than to add it.
I would argue that DoJ vs Microsoft and EU v Microsoft encouraged healthy competition, and didn't hurt innovation. It even forced Microsoft to look outside of the Windows/Office businesses to make money.
Come on. Absolutist positions like that are just wrong and bad for level headed discussion. Some regulation is good, and some is bad. We should be critical of government policy right? Hasn't history shown us that good intentions does not always lead to good results? We need our critics, just like developers need qa.
I have no reason to believe there was any tech built yet.
Robinhood likely lost a good amount of development opportunity cost with the cancellation.
Doesn't moving fast and breaking things on-as you say-"the legal side" in essence mean breaking the law, or did you mean something else and I've misunderstood?
I think it's a matter of phrasing perhaps, that has me a bit confused of what your post is suggesting as a matter relating to the law.