: If Robinhood disrupts the retirement business, it won’t be because of meme stocks and crypto, but stodgy long-term investment strategies

by | Aug 3, 2023 | Stock Market

Robinhood Markets Inc.’s
second quarter earnings for 2023 were a mixed bag: active users down, but assets under custody up. How do you keep a brokerage going when your user base is shrinking? You get a bigger share of their wallets, and the fattest part of most people’s wallets are their retirement savings.  Hence Robinhood Retirement – an IRA product that offers a 1% match on rollovers and new deposits that launched at the end of last year. Robinhood now has 325,000 funded accounts, up 75,000 since last quarter, according to chief executive Vlad Tenev in the company’s latest earnings call, totaling close to $1 billion in assets under custody. Robinhood will start offering a 3% match to customers of its gold service tier soon. 

A company known for meme stock trading and crypto delving into the staid world of long-term investing? Yes, indeed, and mostly pushing a low-cost index-fund approach. They’re also trying to solve one of the stickiest problems in the IRA business – that some 40% of people make retirement deposits and never take the step to invest the money at all, leaving the money in cash.  “We know the perception that’s out there, but this is the opposite of that perception,” says Sam Nordstrom, retirement product manager at Robinhood.  With Robinhood Retirement, you can still pick your own investments if you want, but largely you’re directed toward a recommended portfolio based on traditional investing principles that prize diversification and age-appropriate risk tolerance. The app walks you through a series of typical demographic and goal-setting questions, like when you want to retire.  “If you say you want to retire at 62, you need a portfolio that works over that time horizon, so the first thing we dive into is investing versus cash. We really wanted to hammer that home,” says Nordstrom.  After the live launch, Robinhood quickly learned that telling customers that wasn’t enough. No matter what education they o …

Article Attribution | Read More at Article Source

Share This