INDUSTRY TALK

Robinhood Enters RIA Custody

The deal marks Robinhood’s entrance into the wealth management space, as it aims to connect its investors with human advisors, according to the company.

Robinhood has more than 24 million funded customer accounts, the majority of which are millennials and Gen Z investors, with about $160 billion in assets in custody, or around $6,500 per account, on average. Despite the relatively small individual account sizes, Robinhood believes some of its clients will be looking for more sophisticated financial advice as they age.

“We believe this acquisition is the next step in serving these investors as their needs evolve and mature,” Robinhood said in a statement.

The two companies will create a referral program, giving TradePMR’s RIA clients access to Robinhood customers through a joint tech platform. Robinhood investors will also be able to find and connect with TradePMR advisors. Baldwin said he expects that new platform to be rolled out 12 months after the deal closes. 

Jason Wenk (Founder of Altruist) has an interesting perspective / insight he shared on LinkedIn that I’ll post here:

“First, they will get regulatory approval and officially close the transaction. This will happen early next year, I suspect by April.

After that the RH team will start learning from TradePMR. They'll need to learn all the nuances of serving RIAs, of which there are many.
- 50+ account types
- need to add mutual funds, fixed income, alts, insurance products, etc
- need to integrate with 50+ (often low tech) fintech vendors advisors rely on
- need to build an entirely new advisor platform, middle office to support it, and front end for clients (advisors won't want their clients getting solicited to bet on elections, among other things)
- need to do everything both digital and with paper
- need to have humans available via phone with deep understanding of RIA business model (TradePMR is great here, but only serves 350 firms, RH will want to support multiple thousands)

All of this learning will turn into a product roadmap that will require 2-3 years of development. Until then, existing TradePMR advisors will likely feel very little impact. They will still custody at Wells Fargo/First Clearing, and since the whole system will need to be rebuilt from scratch, they likely won't change the existing UI/UX too much.

They will likely launch Robinhood Advisors (or similar) in ~2 years. This will be how new advisors will sign up and use the platform. Around that same time they'll notify existing TradePMR users they will be migrating to RH for custody and clearing. I suspect the platform will be really solid, but still not quite as robust as firms that have been building RIA custody for decades (Altruist will be 8 years old by then, for example).

Zoom out 5 yrs and RH will be one of the more compelling RIA custody platforms in the industry. I think Altruist and Robinhood will be running circles around Schwab and Fidelity by then. LPL should still be interesting, too, but maybe not as relevant in the stand-alone RIA circles. Apex will serve an important niche as well. Everyone else will likely be irrelevant. In 5 years the industry will be $15 trillion or more; so plenty of room for 4-5 companies to duke it out and innovate on behalf of advisors (and their clients).”

EXCITING NEWS

Michael Kitces Weighs-In On the “Uptick Transition Guarantee”

THE GOAT of Financial Planning, Michael Kitces, gives Uptick Partners “Transition Guarantee” a nod of approval. Turns out we are the only firm that puts our money where our mouth is when it comes to our confidence in successfully transitioning an advisor to independence.

 Link to Wealth Management Article on “Uptick’s Transition Guarantee”