Robinhood, the popular trading platform, has recently seen a significant influx of high-value accounts, with more than 150 transfers exceeding $1 million each, according to a recent Wall Street Journal report. This surge in substantial account transfers primarily comes from larger brokerages like Charles Schwab, Fidelity Investments, and Morgan Stanley’s E*Trade.
Despite Robinhood’s smaller size compared to these industry giants, the platform reported $94 billion in assets under custody at the end of November. In contrast, Schwab alone reported $8.2 trillion in assets, with a monthly core net new asset inflow of $21.7 billion in November. Fidelity and Morgan Stanley also reported trillions in assets under administration and total client assets, respectively.
The increase in account transfers to Robinhood is noteworthy, especially considering the recent consolidation in the brokerage industry. Schwab’s acquisition of TD Ameritrade and Morgan Stanley’s purchase of E*Trade have reshaped the landscape, leading to some client attrition and opportunities for platforms like Robinhood.
Steve Quirk, Robinhood’s Chief Brokerage Officer and a former executive at TD Ameritrade, commented on the industry’s current state, noting the significant disruption and viewing it as an opportune time for Robinhood. However, Schwab has downplayed the impact, stating that it has not seen meaningful outflows to Robinhood and continues to attract younger investors.
Robinhood’s strategy to evolve beyond a trading app for young, novice investors has included launching retirement accounts, introducing 24-hour trading, acquiring a credit-card startup, and increasing the yield on customer cash. The platform’s monthly active users have declined since the pandemic, but interest revenue has surpassed trading-related activities.
Despite these efforts, Robinhood has experienced more account transfers out of the platform than into it in recent quarters. The company extended its 1% match promotion for account transfers to January 31, 2023, from the original end date of December 8, 2022. To retain the 1% match, customers must keep their transferred funds in their Robinhood account for at least two years.