Does Robinhood as a Company Meet the Hype?

by marketn00b

I’ve noticed that there’s a great deal of hype around Robinhood as a company due to their hyper growth and disruptive product. What I’m curious about is whether or not the hype around the company is fully justified.

Some of my worries include:

1. Experienced investors seem to argue that RH isn’t an ideal broker outlined in an article here and a comment here
2. Co-ceos: in the past, for fairly intuitive reasons, startups with co-ceos tend not to succeed. I’m wondering if RH has the same risk.
3. Limited feature set: RH’s main offering is 0 dollar trades and an intuitive UI. However, both of these can easily be implemented by larger brokers once they decide RH has become a large enough thorn in their sides. Furthermore, the lack of advanced features make the company seem more like a stepping stone brokerage than a one stop shop; i.e. once investors gain more experience and capital, it’s possible they’ll take their money elsewhere.
4. Millennial market share: This is something of a double-edged sword. On the one hand, I applaud RH for prioritizing millennials as their target market where every other broker seems to have not. On the other, millennials are facing a tremendous amount of debt and many can’t even think about investments at their stage in life. That being said, as millennials age and finally attain enough capital to think about investing, RH will probably be their first go-to app. However, I’m not sure how long it’ll be before that happens.

Some of my counterpoints to the above (I could be wrong about these):

1. The articles pointing out RH’s shortcomings seem to be a vocal minority. Anecdotally, I have been investing for about 5 years with a fairly passive buy and long term hold strategy. I’ve found that my peers, mostly in the millennial age group, and even my parents, seem to feel the same way. Perhaps RH isn’t catering to that specific market and that the masses don’t mind missing features if they get 0 dollar trades and a nice UI. Furthermore, it seems like RH no longer sells order flows according to this.
2. Don’t have much here. Would love to hear some input on this point.
3. Perhaps these features are not as trivial as we think. Where larger brokerages likely have many older, high profile, investors they need to cater to, RH specifically targets millennials. Similar to point 1, advanced features are not necessarily the answer for a brokerage to do well.
4. Even if millennials aren’t investing a lot in RH, there are a lot of millennial in investing. With enough drops in the bucket, it can become very full.

 

 

Disclaimer: Consult your financial professional before making any investment decision.