Robinhood Woos Wealthier Clients From Bigger Brokerages

Robinhood Markets, known for a clientele of first-time investors, is attracting customers with fatter wallets from other brokerages.

Through Wednesday, the trading app received about $1.1 billion in account transfers since Oct. 23, when it began offering a 1% match on transferred brokerage accounts, the company said. In the second and third quarters of this year, customers transferred about $350 million and $375 million, respectively, to Robinhood from other brokerages, according to company filings.

Many accounts coming to Robinhood through the promotion are much larger than the average Robinhood account. More than 150 account transfers topped $1 million, the company said. The customers have been coming primarily from bigger brokerages including Charles Schwab, Fidelity Investments and Morgan Stanley’s E*Trade, according to Robinhood.

To be sure, Robinhood has far less assets on its platform compared with other brokerages. The company reported $94 billion in assets under custody at the end of November, while Schwab had $8.2 trillion. Schwab brought in $21.7 billion in core net new assets in November alone. Fidelity reported $11.5 trillion in assets under administration, and Morgan Stanley reported $4.8 trillion in total client assets in its wealth-management arm at the end of the third quarter.

The brokerage industry has consolidated in recent years, with Schwab buying TD Ameritrade and Morgan Stanley buying E*Trade. Schwab earlier this year reported some expected client attrition as it moved TD Ameritrade customers to its platform.

“There is some disruption happening in the space right now, probably the biggest disruption I’ve seen in my life,” Steve Quirk, chief brokerage officer at Robinhood and a former TD Ameritrade executive, said of the industry consolidation. “For us, it’s an opportune time.”

Schwab said that it has seen “absolutely no meaningful flows” going to Robinhood and that the majority of the brokerage’s new individual-investor clients are under 40 years old.

“Younger investors may get started with smaller startup firms, but they often move to firms like Schwab as their needs evolve,” a spokeswoman said.

Robinhood has been trying to become more than just a trading app for young, first-time investors as trading activity has dropped. The brokerage’s monthly active users have roughly halved from pandemic-era highs, while revenue from interest has eclipsed that of trading-related activities. Robinhood this year launched retirement accounts and 24-hour trading, bought a credit-card startup and raised the yield it pays on customer cash.

The company said it has received more account transfers into Robinhood than accounts transferred out since the 1% match promotion began, both in number of accounts and assets, but it declined to share details on account transfers out of the platform. In the third and second quarters, more money was transferred out of Robinhood to other brokerages than transferred in.

Robinhood extended its promotion to Jan. 31 from the original end date of Dec. 8. Customers must keep their transferred money in their Robinhood account for at least two years to retain the 1% match.

Write to Hannah Miao at [email protected]