So now they want to roll out retirement accounts.
Robinhood (HOOD), the trading app that fueled the revolt of amateur traders against Wall Street elites in early 2021, introduced Robinhood Retirement on Dec. 6.
Prospective customers were allowed to apply to the waitlist "to invest for their future the Robinhood way - no employer necessary."
The brokerage will offer a 1% “match” to customers who contribute money to an individual retirement account through the program.
"People are relying on themselves," the company said in a blogpost. "They’re taking on gig work, side hustles and building their own companies."
"Tools that can make it easier to save for retirement -- such as automatic transfers from a paycheck or contribution matching -- are often not available to the gig economy -- which makes up as much as 40% of America’s total workforce," the post said.
Customers can choose to invest in stocks and ETFs through either a traditional IRA or Roth IRA.
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The retirement account lets customers build a custom portfolio through Robinhood’s in-app recommendations, by choosing their own investments, or a mix of both.
The program was viewed with skepticism by some retirement experts.
"Retirement matches are good when they come from employers who want loyalty and productivity," said Teresa Ghilarducci, economics professor with The New School for Social Research.
"When retirement matches come from brokers it makes me wonder what they want," she added. "Robinhood's match confirms my suspicion that the company makes a lot of profit from traders and churners, and steering retirement pots to Robinhood is a profitable move."
'An Attractive Idea'
Olivia Mitchell, a professor at the Wharton School of the University of Pennsylvania, said that the 1% matched IRA that Robinhood offers is an attractive idea, "particularly for people who cannot access retirement accounts at their place of employment."
"Indeed, the match is unique for retirement accounts outside employer provided plans," she said. "Nevertheless, as far as I know, Robinhood still doesn’t offer access to mutual funds, which is what the majority of employees hold in their retirement accounts, particularly Target Date funds."
"Thus, investors in Robinhood IRAs will need to rely on the firm’s recommended investment portfolios, which financially illiterate investors may not understand particularly well," Mitchell added.
A spokesperson for Robinhood said that the company's leadership team has been clear that the product is expected to drive sustained, long-term relationships with customers.
In addition, Steve Quirk, Robinhood’s chief brokerage officer who came to the company from TD Ameritrade earlier this year, said in an interview with Barron's that the company actually has “a larger percentage of buy and hold [investors] than I think people realize.”
He said that he expected the retirement feature to significantly increase that percentage, because people invest differently when they’re thinking about retirement.
The spokesperson also said Robinhood’s website does house important educational materials for retirement customers.
There is also in-app education as a customer onboards through retirement that helps them understand the difference between account types, and for those who choose a recommendation, Robinhood includes information behind each ETF provided.
Robinhood Learn also provides additional financial education resources for users, the spokesperson said.
Challenging Times
Robinhood has faced some challenges as its stock has fallen about 45% this year.
In August, Robinhood said it was laying off about 23% of its work force. The announcement followed job cuts in April, when the company laid off 340 workers.
In that same month, the company's cryptocurrency unit got hit with a $30 million fine by New York's Department of Financial Services and was accused of violating anti-money laundering and cybersecurity regulations.
As the company's stock price fell, rumors rose about Sam Bankman-Fried, the founder of FTX, a popular cryptocurrency exchange, might acquire Robinhood. However, FTX collapsed last month, which led to more concern among investors.
CEO Vlad Tenev told CNBC on Dec. 6 that he was unclear what Bankman-Fried is going to do with his 7.6% stake in his trading app, but said he "still sees opportunities with crypto."
Last month, Tenev reassured investors that the company has minimal exposure to the downfall of FTX.
"It’s business as usual at @RobinhoodApp," he tweeted on Nov. 10.
The company posted a narrower-than-expected third-quarter loss last month and reported losing 1.8 million monthly active users over the three-month period, a decrease of 12.8% to 12.2 million.
