Robinhood has made its name over the past decade-plus as the investing platform for millennials and Gen Zers interested in trading and exploring alternative investments like crypto. Now those early users are getting older, and their investment needs are becoming more sophisticated. That explains a key decision Robinhood made this week: The investing platform spent $300 million to acquire TradePMR, a wealth management platform for registered investment advisors (RIAs).
"The needs of Robinhood customers are evolving, and they are seeking advice on how to build and manage their growing portfolios," the company said in a blog post. "We believe this acquisition is the next step in serving these investors as their needs evolve and mature."
TradePMR is a platform for RIAs to connect with investors seeking individualized, fee-only financial advice, and the partnership with Robinhood is expected to take the form of a referral network, coupling the fiduciaries with Robinhood's clients. Details on how exactly the partnership will work and how much it will cost users have not been disclosed.
The acquisition is especially timely since, as the blog post notes, a wealth transfer of an estimated $84 trillion is set to unfold over the next few decades in the U.S., leaving younger investors with more money that they may need help managing. TradePMR, currently with $40 billion in assets under administration, could help Robinhood be more competitive with the likes of Charles Schwab and other firms in offering services that go well beyond trading. Connecting its customer base with TradePMR's existing network of investment advisors means they will have access to fiduciary financial advice for their individual goals and risk tolerance, all within the Robinhood ecosystem.
"Robinhood has steadily amassed a customer base that skews younger, representing the investors of the future," says Vijay Raghavan, senior analyst at Forrester. Indeed, the company reports 75% of funded customer accounts belong to millennials and Gen Z. "This cohort also began investing earlier than prior generations; they are digitally savvy and are reaching an age where they will need more financial advice."
Raghavan says Robinhood's customers tend to be "validators," or investors who gather their own information but seek validation from experts. They are more likely to take riskier risks—like day trading or investing in crypto—for bigger potential returns.
"Validators are also the largest and youngest segment of U.S. investors, so Robinhood’s customer base is a valuable one for RIAs, especially since they are willing to pay for financial advice," he says.
While the so-called Great Wealth Transfer will present plenty of opportunities for platforms like Robinhood to grow its customer base, financial advisors are preparing for client attrition as spouses and other heirs look for professionals they are comfortable working with. By offering its younger clientele advisory services now, Robinhood hopes to avoid that fate (and past research has shown heirs are likely to retain asset managers they know and trust).
"We believe this acquisition allows us to build a multigenerational platform that will help introduce financial advisors to this next generation," said Robb Baldwin, founder and CEO of TradePMR, in the blog post.
The estimated $300 million cash-and-stock deal is expected to close in the first half of 2025, subject to regulatory approvals.
