Reviewing the RobinHood(TM) app ...in 3D !

 I first was introduced to Robinhood (AKA Robinhood Markets, Inc.) in 2016. It was envisioned as a cheap way (in terms of basic development) to bring in potential micro-investors – especially those liked mobile devices and liked instant alerts when something important was happening to their money in the account at RobinHood. A web version with fewer features exists. There is no requirement for a deposit to use the app.

3D: 

RobinHood decentralized, democratized and disrupted a highly regulated and historically non-innovative industry. How does a traditional firm now justify hefty fees to its clients for commissions when anyone with an app make their own trades? The pressure to move toward offering free trades was so intense that in 2020 a merger between financial giants T.D. Ameritrade and Charles Schwab was approved in order to match the free trades concept. JimCramer: Robinhood pushed Charles Schwab to deal for TD Ameritrade (cnbc.com)

It cannot be understated how RobinHood has made an unprecedented impact. The “little guy” wants to invest and for once, someone is listening. Co-founders Vladimir Tenev and Baiju Bhatt saw the large expenses usually needed at a full-service financial services company as nothing more than a barrier to let the Average Joe or Jane into the club. Typically, investment firms are not interested in clients without at least $100K in assets that can be managed (and advisory fees taken). Internet Technology moved in to serve the under-served.

From the early days when it only offered a very limited number of stocks available for trade to present day when one can purchase an expanding array of products like:

·         International Exchange Traded Funds, Mutual Funds, American Depository Receipts, etc., although acceptance of clients is limited.

·         Fractional Shares: The cost of an individual share is no longer a factor for trade.
·         Cryptocurrencies
·         Derivatives (AKA Options): Buy or sell a Put or a Call. You can  learn more about derivatives here:   https://www.investopedia.com/options-basics-tutorial-4583012
·         Cash Card: Working like a rewards card
·         Recurring or one-time balance transfers
·         RobinHood Gold: Subscription-based service for $5/month with enhanced services
·         Market updates and news in real time
·         Cash or Margin Accounts
·         Initial Public Offerings (IPO stock) to eligible clients (se HOOD)

Robinhood has an interesting history: Robinhood Markets - Wikipedia.

As a member of the professional financial services industry for over a decade, I never “gambled” (because there is certainly a strong element of speculation) any more than I could afford to lose. Robinhood has been blamed as having “gamification” as a lure for unsophisticated investors. The Security and Exchange Commission (or SEC) has also probed their practices and keeps them on a watchlist.

The mobile app rivals (or even exceeds) that of the laptop version, probably because a lot more early stage development of the mobile version took place at the mobile platform stage. Screenshots were taken after trading hours. Otherwise, the account values would fluctuate so much that the account balance would not be the same.

 

Figure 1. Mobile version versus Laptop version. NOT SHOWN FOR PRIVACY

RobinHood goes to some considerable trouble to make its User Experience (or UX) on the desktop version to look and feel like the mobile version and relies heavily on expansion through referrals.

 Figure 2. NOT SHOWN FOR PRIVACY

Figure 3.NOT SHOWN FOR PROIVACY

Unlike many other apps, RobinHood doesn’t bring in partner companies as a part of the UX. It also has no social element to it. It’s 100% personal.


RobinHood makes money two ways:

·         Interest off the cash sitting the account in the app

·         Payment-for-Order-Flow. In bulk, through a perfectly legal method, a trade can be made whenever there is a [profit to trade it until they can hold it long enough to make a profit themselves in larger volumes. This process is completely legal and has been done with finesse by the wirehouses of Wall Street for decades. Microseconds can make the difference in profit or loss. Pennies add up fast.

As of 2021, with 22.5 million users and $959 million annually in revenue, it’s doing something very well.  Robinhood Revenue and Usage Statistics (2022) - Business of Apps. Having said that, RobinHood Markets stock value has decreased 76% in value since it went public in July of 2021. Robinhood Markets, Inc. (HOOD) Interactive Stock Chart - Yahoo Finance.

You can read more about it here: 

Pasztor, J. (2021). Robinhood--Hero or Villain? Journal of Financial Service Professionals, 75(5), 18–22.

This is what I would offer to improve the apps.

·         Offer a search bar in the laptop version.

·         Don’t bother trying to provide some kind of investor opinion on stocks in the mobile app front age. It’s too plain and misleading.

·         Offer a service, even if it’s paid subscription, to help a person create a professional management strategy using modern portfolio theory (MPT).

I

    I give it a 9.5 / 10

In In general, RobinHood is a wonderful tool to have access to no matter how much (or little) money a regular person has to play with – with the emphasis on play. It’s not something I would feel comfortable trusting with a lot of my money.  I give it a 9.5/10.

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