Robinhood CEO on 24-Hour Trading and New Retirement Accounts

Summary:
GameStop showed the importance of retail investors and platforms like Robinhood. Robinhood is expanding its offerings to include retirement accounts and credit cards. They are also introducing 24-hour trading. Robinhood believes crypto is here to stay and will work with regulators. The market may be underappreciating Robinhood, but they are focused on serving customers and growing. Robinhood is still considered an underdog in the financial services industry. The CEO has not seen the movie “Dumb Money” but acknowledges its fictionalized nature.
Full News:
– Do you think we’ll
ever see another moment like GameStop in retail investing? – I think what GameStop showed is that retail investors are a really, really
important part of the markets and a constituency that can’t be ignored. And a big part of that is due to the impact of
Robinhood and the mission. – [Hannah] Robinhood was founded with the goal of democratizing finance. It’s easy-to-use app made trading free and spurred a generation
of retail investors to jump into stocks, including GameStop. – GameStop’s shares is
absolutely going nuts. – [Reporter] The weapon of
choice for these new traders are platforms like Robinhood. – But since then, Robinhood has lost roughly half of its active users. Now, CEO Vlad Tenev is
focused on growing Robinhood into something more
than just a trading app. WSJ caught up with him at
the company’s headquarters to hear how he hopes to make Robinhood the most trusted name in finance. What was the moment you knew
that you created something that changed how everyday people invest? – End of 2019, when basically every single discount
brokerage in quick succession lowered their commissions to zero and essentially replicated our model. And at the time I remember
being a little bit nervous. You know, you get all these questions. What does this mean for the company? Like, we really have to up our game to continue to differentiate
with our customers. – What would you say is the next frontier for democratizing finance? – We’ve done a great job with trading and self-directed investing. Now the next area we’re
tackling is retirement. And so we’re the first to offer a 1% match in an individual retirement account. And it’s a big part of our journey from helping customers
get started investing to managing all of their finances and providing service across
all of their financial needs. – A lot of the investors I talk to do still associate Robinhood with GameStop and the trading restrictions
during that period. So what do you say to customers who lost trust in
Robinhood during that time? – I understand that perception, but what I’d point to is the amazing progress Robinhood has made and continues to make. – [Hannah] Robinhood has gone from an app that blasted confetti
after a user’s first trade to a company offering retirement
accounts and 4.9% interest on uninvested cash for
premium subscribers. The disruptive brokerage is looking more like a
traditional finance firm and with its acquisition of
credit card startup X1 this year Robinhood has a credit card in the works. – We think credit’s a huge opportunity. There’s so many customers
that are either underserved or not adequately served with
their credit needs these days. And I think Robinhood can
play a huge role there in democratizing that space and make it easier and
a much better experience to offer those products. – [Hannah] This pivot to new offerings is part of the company’s strategy to attract and hold onto users in this high rate environment. Trading stocks isn’t as
popular as it used to be. Investors now have other
options for good returns. – One of the really interesting things about the investing business
is it does tend to be cyclical with growth coming in waves. In times where interest rates are low like they were in in 2020 and in 2021, you see a lot of interest
in investing in the market. And in other times there’s
just less interest. And so what we look at there is how can we improve our product and service and continue to innovate for
our traders and investors with things like 24-hour market, which makes us the
first in the US to offer round the clock trading
for single name stocks. – [Hannah] While getting
into retirement accounts looks more traditional,
24-hour market is anything but. It’s a big shift in how
users can trade stocks like Amazon, Apple, and Tesla. – With 24-hour trading it just
seemed ludicrous to me that, you know it’s 2023 and
investing in the most liquid, deepest markets in the
world, the US capital markets is still tied to US east
coast working hours. Everything is electronic elsewhere and services are available
when people need them and yet investing is
kind of this exception. And when we looked into it we realized that there’s no reason that it had to be this way. We could work with counterparties, we could build the technology
to make that better. And 24 Hour Market, which
launched a couple of months ago is kind of the first
step in that direction. So I think it’s still very early to tell what kind of impact
it’ll have market wide. And I do believe in not too long you’ll see it become an industry standard just like commission
free trading has become. – If that does become
the industry standard are there any risks you see involved? – One thing that you have to remember is we already have experience with assets that trade round the clock. If you look at the cryptocurrency markets, they trade 24/7 worldwide and you know, we’ve been offering customers access to crypto on the platform since 2018. – Speaking of crypto, it’s
obviously been a hot topic in the regulatory space
over the last year. As one of the first
brokerages to offer crypto, are you committed to offering crypto to US customers moving forward? – Yeah, and I think
crypto is here to stay. There’s definitely been a
lack of regulatory clarity and I think we’re gonna
continue to work with lawmakers and regulators to push forward there. – Shares of Robinhood have
had a nice run up this year but they’re still down about 80% from their record high from 2021. Do you think there’s anything the market is under
appreciating about Robinhood? – Over a long time period companies are valued on earnings growth and the stock price tends to track that. It might not happen for various
reasons in the short term. What we can continue to
do is serve our customers, improve our products, grow market share but there’s always more to do. – Do you still think
Robinhood is an underdog in the financial services industry? – I do. Robinhood’s been able to
accomplish quite a bit over the past 10 years
since we got the idea for it but it’s still a very young
company and I do believe you know, 10 years from now looking back to where we are today, we’ll really appreciate that we’re still in the early
stages of Robinhood and there’s so much to do. – [Hannah] Even as Tenev looks ahead, a reminder of Robinhood’s association with the GameStop craze is
out in theaters this month. – And that stock is GameStop. – Have you seen the movie “Dumb Money” about the GameStop saga in which you are a character in the movie? – I have not seen it. Having a movie created
that has Robinhood featured is I think a really important testament to the impact we’ve had but you have to remember
the movie’s fiction and nobody sort of talked to us about it. So I think I’m expecting it
to be a fictionalized account and hopefully some of it’s true. (gentle music)