I always find surprising that Robinhood was able to build such a large business with such mediocre customer support.
I switched to Charles Schwab and just the fact that there's a 24/7 phone number compensates for the lack of simplicity.
I used to think that I wanted the simplicity of something like Robinhood. But I have learned to appreciate the complexity of Schwab. The reality is that behind Robinhood's simplicity there's a lack of sophistication and process in their operation.
I commend what they built, but Robinhoood it's too exposed to the cross winds of retail trading and regulatory scrutiny.
I feel that by having my investments in Robinhood, I'm adding some sort of risk multiplier that has nothing to do with the nature of my investments. It has to do mainly with how amateur-ish their brokerage operation feels.
Yup. The playbook of modern tech companies seems to be:
1. Solve the easy 80% of the problem.
2. Deploy that "solution" - which would not be considered acceptable in just about any other industry - as widely as possible. Do not offer proper customer support.
3. Take the money you save on not solving the hard parts and not having customer support, and funnel it into marketing, to stimulate growth.
4. Continue until you fail, get acquired, or dominate the market.
5. If anyone asks what kind of outfit you're running, make a sad puppy face and say "scaling is hard!".
The issue is that the current players are unable to solve that part properly.
In my country, it was impossible to book a cab with an app before uber came.
Yesterday, I tried knowing if my insurance covered some dental cost, and I was unable to sign up or login on the website, I had to call a human to book an appointment to a brick and mortar store. This is the biggest insurance provider in a western european country. I'll take the new "startup" as soon as it comes, just because they make 80% of what I need convenient enough. They can deal with the remaining 20% later, currently my 80% needs are not served.
The problem with this is that if you hive off the 80 percent that is easy and profitable you may also end up binning the competitors and then there is nothing for the 20 percent if the new competitor decides to do absolutely nothing.
This is what happened when Craiglist and later Facebook cannibalized classified ads in the US; many local and hyperlocal newspapers disappeared because they were not big enough to attract major advertisers, but all the local ones left. Yet Craiglist provides no news at all and Facebook aggregates news but certainly doesn't produce any, and especially not at the local or hyperlocal level.
Does your circle of friends on FB actually go to every county, water board, school board, etc. meeting and take notes? Because that was the old role of the local paper, which could often get scoops from a reporter whose job it was to go to those.
Anything interesting that happens at a school board makes the news now because everyone there has a phone and internet. What exciting scoops do you think we're missing?
Towns where the newspaper has shut down have provably higher levels of excess spending and governmental waste & corruption:
> Cities where newspapers closed up shop saw increases in government costs as a result of the lack of scrutiny over local deals, say researchers who tracked the decline of local news outlets between 1996 and 2015.
> Disruptions in local news coverage are soon followed by higher long-term borrowing costs for cities. Costs for bonds can rise as much as 11 basis points after the closure of a local newspaper—a finding that can’t be attributed to other underlying economic conditions, the authors say. Those civic watchdogs make a difference to the bottom line.
The government->business pipeline is older than any living president. It's not like all the companies who founded Silicon Valley on government contracts lucked into it.
In particular, a sufficiently advanced business looks like an undemocratic, authoritarian, central-planning government. Basically, the problem with large corporations is that they are communist dictatorships.
And here I thought that once you include boards and shareholders, you get something isomorphic to democracy :).
If we're considering corporations to be "undemocratic, authoritarian, central-planning (...) communist dictatorships" inside, then so are all democratic governments. The "voice of the people" part of a democratic government is just a surface layer, the tip of an iceberg. Or, more charitably, a rudder of a ship - the part that sets the course, but is nevertheless insignificant in mass compared to the rest of the ship.
The bulk of every government is a top-down hierarchical structure, because it can't really be any other way. You can't hold votes on whether a particular clerk is supposed to be in a particular building on Monday 09:00, and whether they're supposed to approve the form you're trying to submit.
In a representative democracy you get a voice on who executes the orders regardless of whether you are rich or poor or smart or stupid or went to business school with who-knows-who.
Are they? Corporate shareholders have power of on-demand accountability and enough competency to grasp the goings on of a board meeting, that is not what a random _demos_ in a representative democracy is composed of and it changes the whole game, that's not a minor detail. Even besides the competency/knowledge problem, American citizens cannot, amongst themselves, zero external mediation, vote an elected official out of office as far as I'm aware.
If we were in Plato's perfect Republic where all the uninitiated adults were purged from the polis and there were only citizens trained since childhood to seriously consider matters of state, now we'd be in the same sport, if not ballpark.
That's true, and IMO, it's pretty much entirely the function of size. Modern governments are what you get when you try to organize millions of people - so it's not really surprising that, as a company grows, it starts to look like a government from the inside. It couldn't be any other way.
How would you feel if the Nuclear Regulatory Commission soft-balled Mr. Burns, then one of its commissioners jumped ship to work at Springfield Nuclear?
Even if that commissioner was an enlightened patrician of high moral character, it would create the appearance of corruption. And that alone is corrosive to the rule of law.
People with less integrity, people downstream in industry, might interpret that as a signal that regulators are a joke. They may go on television and say things like "I don't respect the Nuclear Regulatory Commission."
Part of the issue, IIRC, is that you want regulators who are experienced with what an industry does, and practically speaking the easiest way to get that is to hire from within the industry. We should probably keep that bit of the revolving door working.
The bigger problem is the reverse; we should really have the government do something like finance's "garden leave", where leaving employees are paid while banned from industry employment, so that whatever competitive info you had is outdated by the time you can take a job in industry again.
>How would you feel if the Nuclear Regulatory Commission soft-balled Mr. Burns, then one of its commissioners jumped ship to work at Springfield Nuclear?
If I'm from New Hampshire, Ohio, Maine, South Dakota or somewhere else government is still kinda sorta accountable I'm Outraged(TM).
If I'm from Massachusetts, Louisiana, California, New York, or somewhere else government has been unaccountable for generations I shrug and move on with life.
> it’s a brand new account calling out people in the Obama administration for corruption and ignoring all of the much more recent corrupt Republicans
To be fair, its possible that the poster was merely meaning that the template is “Hire the available ex-regulators of the party currently in power”, but was communicating that by applying the template to the current situation, where we are in the first year of an Administration, so the available supply of regulators meeting that description will generally be from the last Administration of the same party.
When Jamie Dimon discussed the warm relationship between Obama officials and tech in a public speech at Stanford, I assumed it was (1) common knowledge and (2) socially acceptable to discuss in public.
I think the current administration has made excellent personnel choices in the regulatory agencies. I am hopeful for the future.
But I don't think I "called out" anyone. I understand that expression to mean "seeking to direct reflexive mob anger toward a specific individual". It's the practice that's troubling, not the people.
I actually believe that most of the people engaged in this practice (revolving door) have impeccable moral character.
Unfortunately many people call out Obama specifically as a way to take a partisan political jab at the left especially on forums. Trump’s White House was full of crooks who really were there based 100% on who they knew since many were otherwise unqualified. It makes going back a president feel like cherry picking an example but I see you could have done it as Biden would draw from Obama’s sphere more.
I am not aware of the specific Dimon speech you mentioned. Ajit Pai had a close relationship with the ISPs and Telecommunications companies with all their attacks on net neutrality etc. so I do find that the argument that Democrats are so much cozier with tech to be a bit oversimplified.
I agree with your comment overall, just shedding some insights on my thinking
VC money is unfathomable. It's not drying up any time soon. They may choose to shift it if there's some kind of crash, but it's too much money to just run out.
VC money is top 1%er money. Because they are so overloaded with cash even really hairbrained stuff gets funded by someone looking for something, anything, that can beat the market.
The VC market is basically medieval patronage with a capitalistic flair. Now the patrons are expected to bring you in massive returns instead of just producing culture.
While that's true, it may only be part of the story. There is a clear tension between "democratize X" (for Robinhood X is "finance for all") and offering a white glove service, including stellar support for everyone. It simply won't scale.
Democratizing X also means commoditizing X by offering a minimum acceptable solution that will become what people are taught to expect. I am not sure there is a way around this to be honest.
Schwab and Vanguard are completely free if you're not trading individual stocks, which in complete bluntness virtually no retail consumers should be doing.
Robinhood has gotten their position by invisibly and dramatically increasing the amount of risk assumed by their customers' life savings. Everybody's a savvy investor in a record-breaking bull market.
> Yeah, well, I regularly read on HN about how retail consumers are locked out of investing in stocks, that only rich people can.
Vanguard and Schwab already did that decades ago. They just didn't gamify their products or benefit from meme culture.
> I've been a retail consumer stock investor my entire adult life, and would be pretty unhappy if regulations locked me out of that.
"Retail consumers should not be [trading individual stocks]" is not a claim that individuals should be barred from putting their life savings into belly button lint futures if that's what want to do. It's simply stating that by and large, individuals should be encouraged towards sensible defaults and not simply whatever the latest meme investment is. Veering from those defaults for non-trivial sums of money should involve increasing levels of warning and resistance proportionate to the estimated change in risk.
And that goes in both directions. Just as retail consumers should be given additional levels of resistance for investing in individual stocks, investing in recently-memed stocks, buying put options, and buying on margin, they should also meet resistance when putting their entire balance into cash positions as happens to far too many investors that don't realize the error.
> Vanguard and Schwab already did that decades ago.
I know that. I didn't say the HN comments were correct! Heck, even in the 1920's there's that famous story of the elevator boy talking about the stocks he was trading.
Let adults be adults and invest the way they want to. The government shouldn't be treating them like children.
The level of effort and personal commitment necessary to commit your life savings toward starting your own business vs. putting it all into meme stocks isn’t even remotely comparable.
One of these can be done in ten minutes from your couch while stoned with a handful of clicks. I’ll leave you to guess which of the two it is, but suffice it to say that’s the one I think should have some additional guard rails.
You can buy individual stocks without yoloing your entire life savings into meme stocks.
The movement to limit the most profitable investments only to “experienced” i.e. already wealthy investors is one thing that prevents average people from accumulating wealth.
If an average person is allowed to walk into Vegas and put their whole life savings on black, or spend it on lottery tickets why shouldn’t they be able to buy a stock? Less nanny state, please not more.
> The movement to limit the most profitable investments only to “experienced” i.e. already wealthy investors is one thing that prevents average people from accumulating wealth.
This is ridiculous. High-quality, virtually zero-cost index funds that track the market (or various subsectors of the market) are available to essentially every American and have been for decades. These investments have produced returns well in excess of the average performance of the overwhelming majority of investment professionals.
Further, their risk-adjusted returns have been second to none. Throwing novice investors into the deep end of the pool with the consolation that some small fraction of them will beat the market and some minute fraction will win the lottery doesn't help "average people" accumulate wealth. Every available metric we've tracked has repeatedly shown that "average people" have the best performance from low-cost index funds with a long-term buy-and-hold strategy. Every other strategy has demonstrably worse performance on average.
> If an average person is allowed to walk into Vegas and put their whole life savings on black, or spend it on lottery tickets why shouldn’t they be able to buy a stock? Less nanny state, please not more.
It is wild to me that every single person detracting from my comments seems to believe that "retail investors should not be investing in individual stocks" is some sort of call to have the government step in and prohibit individuals from investing in $TSLA.
Nobody is asking for that.
We're saying that Robinhood is playing an extremely dangerous game with their clients' well-being by promoting risky and irresponsible decision-making around their livelihoods. This has been a successful strategy for them so far, but it has relied entirely on the unprecedented bull market we've found ourselves in. I'd bet large sums of money that their internal metrics show their customers perform significantly worse on average than the market overall, and I'll double that bet that their customers will fare amongst the worst when the next correction hits.
What exactly are you proposing then? You literally said no retail investor should be purchasing individual stocks. It's not a giant leap then to think that you want to prohibit retail investors from purchasing individual stocks. If that's not what you want, then what do you want?
> We're saying that Robinhood is playing an extremely dangerous game with their clients' well-being by promoting risky and irresponsible decision-making around their livelihoods.
How does Robinhood promote risky and irresponsible decision making? Robinhood doesn't force anyone to buy stocks. Retail investors have been able to buy stocks since the stock market existed. Robinhood's innovation is to let them do it for $0 commissions, which dramatically decreases risk for small investors.
For example, Vanguard charges a $7 commission per trade unless you have hundreds of thousands of dollars invested with them. If you want to invest $100, you will pay $14 in commissions - $7 when you buy and $7 when you sell. Now your investment needs to return at least 14% just to break even.
Compare to $0 commissions on Robinhood, now, if the underlying investment makes money at all, you make money. This is a huge benefit for people who only have small amounts to invest.
The $7 commission doesn't matter much if you're investing tens of thousands of dollars, it matters a lot if you're investing much less.
> What exactly are you proposing then? You literally said no retail investor should be purchasing individual stocks. It's not a giant leap then to think that you want to prohibit retail investors from purchasing individual stocks. If that's not what you want, then what do you want?
I'm not proposing anything. I didn't say anything to even suggest I'm proposing something.
All I said is that retail investors, by and large, shouldn't be trading in individual stocks. And they shouldn't! It's a demonstrably less-successful investment strategy on average than index investing. Especially for completely novice investors.
"Nobody should be feeding chocolate to their dog. " "No parent should use an iPad as a substitute for actually raising their child." "Nobody should buy a home warranty, they almost never end up paying out." Which of these statements do you think are even remotely close to advocating for government intervention?
> How does Robinhood promote risky and irresponsible decision making? Robinhood doesn't force anyone to buy stocks.
In what universe are "promoting" and "forcing" equivalent verbs?
Why can't it simply be true that encouraging financially illiterate people to day trade is just an unfathomably irresponsible idea? All of the available evidence supports this assertion. Sure, some people will do better than others; that's the nature of statistical distributions. But on the whole, day traders do measurably worse than buy-and-hold index investors.
That's not a claim that all of Robinhood's customers are financially illiterate. Nor is it a value judgment against those who are. It's simply a statement that Robinhood explicitly markets their services towards people with little to no financial background, and everything about their in-app experience is designed to encourage a style of trading that is drastically more likely to leave those customers less well off than more boring approaches. And—very potentially—less well off than just leaving their money under the mattress. Countless retail investors lost absolutely everything by selling during the recession. Do you expect Robinhood's customers to do better on average or worse than average in the next one?
> Robinhood's innovation is to let them do it for $0 commissions
Robinhood's "innovation" is gamifying the whole thing and taking advantage of meme culture. If they'd managed to do that for boring-as-shit index funds, that would have been an achievement of absolutely immeasurable value. Instead all they've done is found a way to bring fresh, unsuspecting bait to the sharks' feeding grounds.
> For example, Vanguard charges a $7 commission per trade unless you have hundreds of thousands of dollars invested with them. If you want to invest $100, you will pay $14 in commissions - $7 when you buy and $7 when you sell. Now your investment needs to return at least 14% just to break even.
No retail investor should be purchasing individual stocks.
Vanguard has $0 fees for index funds, which is where the overwhelming majority of retail investors should be putting their savings. And at those numbers, the transparent costs of expense ratios are essentially nonexistent.
I agree, but I would also not compare investing in stocks and starting a company.
Starting a company is not for everyone. It's a calling.
Being able to invest and get competitive returns should be democratized. It is a known fact that the richest have historically been able to invest their money and get high returns while the rest of us had to settle for savings accounts (0.5% return currently). And the trend is accelerating[0], inequality is growing. This is not sustainable and should be addressed.
> I agree, but I would also not compare investing in stocks and starting a company.
Neither did nor would I.
> Being able to invest and get competitive returns should be democratized. It is a known fact that the richest have historically been able to invest their money and get high returns while the rest of us had to settle for savings accounts (0.5% return currently).
It is already democratized, and your last statement isn't even remotely true. Low-cost, whole-market index funds have been available to Joe Public for nearly fifty years now, and in those intervening years have represented essentially the optimum in terms of risk-adjusted returns.
Robinhood has not democratized investing, they've democratized day trading. It's like praising Harrah's for removing the rake (the casino's cut) from their poker games and promoting Hold Em to complete novices. Sure, some of their new customers will make it rich. And there are plenty of highly skilled poker players who've made a career out of it. But that's not the norm; the net result is just bringing more chum for the sharks to feed on.
As I said elsewhere, if Robinhood had figured out a way to get people to buy and hold boring-as-shit index funds through gamification and meme culture, it would be an achievement of immeasurable benefit. Unfortunately that's not what they've done. They've rebranded day trading as investing and brought a heaping mass of fresh, unsuspecting victims to be exploited by financial professionals with entire teams of researchers backing their plays.
The only reason the whole thing hasn't completely disintegrated is because of an unprecedented, once-in-a-lifetime bull run where it's been virtually impossible not to make money. There's no way this works out in their customers' favor in the long run.
Agreed. And perhaps it's getting too philosophical, but one could argue that a big role of a government is to protect its citizens from everything that has a high risk of incurring sudden and effectively unbounded losses. Whether it's mandating installation of actual guard rails through health and safety regulations, or regulating away business models that tend to make regular people broke by accident.
I've seen a bunch of (usually smaller or just starting) tech companies win out business because of how responsive their customer support even though their product was inferior.
Robinhood won because it saw an opening in changes in market demands:
- Increasingly lax SEC rules for retail traders.
- Increases in income inequality whereby the poor side of the spectrum has been told they can't have access to the rich's set of investment tools (i.e. millennials with varying degrees)
- Per transaction fees that made day trading appear less lucrative (see point before)
- Competitors with terrible UIs for non professional traders
Part of the reason the ETrade/Schwabs/TD's of the world didn't do what RH did was because it meant deliberately making creating a trading account more difficult. For example - Vanguard almost deliberately makes their service hard to day trader because they don't want to carry that risk profile.
So, this was not a market that was crying for better customer service but one that wanted cheap, easy to use access to investments that were seemingly unattainable previously.
I'm actually more surprised the SEC (or a class action lawsuit) didn't thwart RH turning into a large business when it was much smaller...not the competition.
I do want to add some nuance to the salty and cynical takes here, even though I share the overall conclusion that tech support is terrible across the board.
You can't compare a service like Robinhood (or Coinbase, the like) with a product like Google or Facebook:
1. Unlike these free services, at an exchange, you really are a customer. The business model is that you pay fees for transactions. That's not the same as a free "take it or leave it" situation. As a paying customer, it is far more reasonable and expected to get support.
2. The nature of the support queries are far more serious. This isn't about your Instagram app glitching, this is about money. People unable to access it, transactions not coming through, withdrawal errors, fiat/banking errors. All very serious matters where not only you expect support, you expect urgent support and typically human support.
Now combine the above issues (true support needed, and much of it human support), we add the third and fatal ingredient: user growth. These services grow by at least a few million users per month.
I don't know how many require support, but even a small percentage means you're on a constant hiring spree.
Google and Facebook scale up by just not giving any support. How do you scale up this fast giving real support, so not just an FAQ or chat bot?
You are totally confused. Robinhood is free trading and you are not a paying customer. Robinhood’s incredibly sketchy business model is being paid by Citadel for order flow. So it’s very similar to Facebook in that the consumer is the product, not the customer.
Robinhood is an awful company that’s a net negative on the world. Their biggest innovation is creating a Candy Crush UI for complex derivatives trading and making it accessible to people who failed high school math. Their CEO has been consistently dishonest and fraudulent.
If you want a solid mobile trading app for stocks and options Thinkorswim is light years superior in every dimension but looking like a Vegas slot machine.
>I always find surprising that Robinhood was able to build such a large business with such mediocre customer support.
This is the standard people have become trained to expect. Google does the same thing. The idea is basically that a certain level of scale, you can completely ignore customer support. There's always new users signing up, and placating any single one is no longer worth your time.
Anyone who does serious trading knows the value of actual 24/7 human customer support, and uses a platform like Schwab or Fidelity. But Robinhood is arbitraging the naivety of the millions of people who've never invested.
If consumers are not willing to pay for the product, it makes sense that they would not get good customer service. The users are not customers of Robinhood or Google. The users are the product that Google sells to advertisers and Robinhood sells (in the form of data) to hedge funds and HF traders.
Schwab and Fidelity can deliver a good product with good customer service because users pay money for the product and are actually customers.
I've paid close to nothing to Schwab for decades. They even refund my ATM fees. Of course, I assume they take a bit off the top from money market accounts, etc on large balances.
They were one of the early companies that learned that treating your customer right is a better long-term business than screwing them at every opportunity. Wasn't so common in the 80s and 90s.
That is right Google operates under the assumption of people as in large groups of individuals. Their primary drive is to add billions of more people to their graph, https://nextbillionusers.google
If you read through the marketing material, you will notice that they use the word people and not individuals or persons or you. "People are at the center of everything we build."
For what is worth, Fidelity customer service is quick and reliable. They've always answered by questions or solved my issues over the phone.
During my time at Amazon we used to joke about an, alleged, Bezos quote: He hates CS and wished he could live without. The narrative was, that operations weren't good enough to make CS unnecessary. Well, it sometimes seems it was just a question of scale, as you said. And maybe Amazon is just figuring out whether or not they can get away with it, little by little.
I can't imagine anyone doing "serious trading" using Robinhood. I also can't imagine a scenario where I would need to talk to a customer support rep at Robinhood. What kind of support might I need while occasionally placing limit buy and sell orders?
I love that you get on a call with real native speaker in the US with Schwab; that part of customer support has been stellar. I like that they cover international ATM fees too.
I don't care for how they handle security though. I really wish they supported WebAuthn or at least TOTP that didn't require Symantec's proprietary TOPT solution. I wish they supported PGP for messages as well (I know those GMail users are having their financial data read by Google). When I asked about what "SchwabSecure" really is and what sort of encryption they use gave me marketing fluff, even stating "The reason you may not find more detailed information available online which supports this is so that we can prevent criminals from obtaining this information, and using that to get a foothold"--as opposed to my recent evaluation of email providers to see the competition who could provide the MOST transparency about how they set up their security.
This will print out all the information needed. Note the Symantec ID (it looks like VSMT12345678). It is what goes in the "Credential ID" field when adding a new device on Schwab's website.
3. Save the otpauth://... data into data.txt.
4. (Optional) Modify the issue=Symantec parameter to read issue= Charles%20Schwab Also change VIP%20Access:VSMT123456789 to your Schwab online banking username. These are purely aesthetic changes and will only make a difference in the label that shows up in the Google Auth app.
5. Run: qrencode -o qr.png -s 15 < data.txt to generate the QR image (qr.png) from your otpauth data file.
6. Scan qr.png with your TOTP app.
7. Go to Schwab -> Service -> Security Center -> Manage Two-Step Verification -> Add another Security Token and input the Symantec ID from step 3 (it looks like VSMT12345678) and the current rolling TOTP code from your TOTP.
I'm happy you brought it up. I read about this a while back (haven't yet prioritized doing it though). More I was commenting on the principle of using a closed-source TOTP product. Reading the reverse engineer blog gave me anxiety. The project had issues in the past when they blocked spoofing a certain Apple device and it's disgusting that this is even a 'thing'.
I just did this to success. My biggest suggesting in this copy-paste is changing "Google Auth" to "TOTP authenticator". Do not endorse Google products when the open source alternatives like andOTP and pass-otp are great. It's bad enough Schwab is supporting the closed-source Symantec authenticator whose application is not available on GNU/Linux or BSD.
The unlimited ATM fee reimbursement from Charles Schwab is amazing, especially for international travel. My brother just spent 3 years living in Australia and was able to withdraw from Charles Schwab and then deposit into his Australian account with zero fees and a better exchange rate than any other service available to him.
If you are concerned about security, you can just leave a couple of hundred bucks in there for whenever you need cash and push funds to it from your main bank to top it up.
I love Schwab but agree on the security front. They tried to push everyone to use their voice auth for phone verification. I want more security not less lol. I remember several years ago, they didn't support special characters in passwords. Hopefully that has chanced.
The only major company I know that even has the option for PGP on email is Facebook. It works quite well and was pretty easy to set up, so long as you don't use a webmail client or your phone.
Talking over the phone, which doesn't have great voice quality to begin with, about a potentially stressful and time critical situation is not something accents help with there is nothing wrong with that statement.
A counfounder here is that a strong accent is correlated with outsourcing customer support to low-cost providers to companies with far-away, underpaid staff who lack cultural context and social power within the company they nominally work for.
Personally, I think the much bigger problem is the shitty outsourcing. But semi-sensical corporatese excuse-making is definitely not improved by language and accent barriers.
Thanks for expressing what I was trying to figure out how to put into words. I feel no animosity towards the folks stuffed in a call center for crap wages. I'm irritated with the company that outsourced their support to India and pays them crap wages to try to navigate technology that they don't have adequate training for and at least have no real power to fix.
I mean I had a fun conversation with an older lady who was living in my birth state. This made a MUCH better experience than having a purely technical call.
How do you function in a remote first world, where most of your team joins calls over Slack or Teams? It’s weird that someone painstakingly learnt English, but you don’t can’t put in the effort to listen and understand.
It’s a bit of a stretch to say someone who speaks with a thick accent in grammatically questionable English has “learnt” English. One can respect the effort while at the same time being incredibly frustrated with having to carry an additional cognitive load when attempting to communicate with someone ill-equipped to do so. There’s absolutely nothing wrong with that.
This is such a ridiculous thing to get annoyed about. I work with a bunch of Croatians; do you really think they prefer that I speak English (US), or would they like it more if I were fluent in Croatian?
If I'm calling support, I'm probably not in the mood for anything being frustrating or confusing. I spend every day in countries where English isn't the primary language, but in face-to-face or chat or even video call, there are ways to indicate nonverbal cues. I have to take phone calls from delivery men when bare know any English and I feel sorry for them having to be asked to wade through my attempt to speak their language or my English because they don't get paid enough for that.
On the otherhand my (massive) bank sure as heck better have the money to afford good native support. And for my beefs with Schwab, this they do a very good job at.
>I feel that by having my investments in Robinhood, I'm adding some sort of risk multiplier that has nothing to do with the nature of my investments. It has to do mainly with how amateur-ish their brokerage operation feels.
In the sense that they'll collapse and you'll lose your portfolio, or that they'll be down at a critical time you want to make a trade? For a buy and hold type of investor, the latter isn't really a concern.
Even if RH fails in some spectacular way, it'd be hard for all the customer assets to actually vanish. If you have 10000 shares of AAPL, but only 9000 shares are there, should still be good.
I agree 1000% with this. I "recently" switched from RH to ally since I already have a decent chunk of cash there, and I am STILL waiting on my cost-basis to transfer. It has been over 75 days since they transferred my stock and cash, and every time I reach out to customer service they feed me the same canned response that due to volume of transfers it is taking longer than expected and they have no ETA on when my cost-basis will transfer.
This happened to me when I transferred to Schwab. Surprisingly it was Schwab the one that eased my mind. I called them and they put me through the cost basis department which told me that RH basically has to prepare the cost basis manaually and
pass it to them/ They told me that it had been taking a while but that they were indeed receiving the Cost Basis for other customers.
So I just had to wait. Of course this sucks because it blocks you from selling, but it will eventually show up.
Does it actually block you from selling? I think you really need to have the cost basis figured out for tax time - you sure Schwab won't let you? Even with a manual request?
Same deal here, switched to Vanguard. After a few weeks I called in to ask about it and they offered to send a letter to RH on my behalf to get that information transferred. Sure enough, about 2 weeks later all my information was in Vanguard!
Baffling that the US financial market is simultaneously run by supercomputers built as close to the physical stock market as possible to reduce latency, and then also manual letters and people personally mailing checks and such.
Is it actually baffling? The computers do the very specific narrow set of operations (post order, match, accept fills, cancel) while the much broader range of "what else may come up" is less automated.
Beware that Robinhood also miscalculates wash sales, which they've admitted to me. I typically don't care about customer support, as I don't do a lot of trades, but messing up tax forms is a huge no-no for me.
Could you elaborate on what scenarios it would get messed up in? I expect it would happen if you're working across multiple brokerages, but is there any other scenario? It'd be helpful for us to know and watch out for it.
The most basic scenario. I bought X shares of a stock for the first time ever, and sold it < 30 days later for a loss. That loss should not be a disallowed wash sale, but Robinhood claims it is. facepalm
> I always find surprising that Robinhood was able to build such a large business with such mediocre customer support.
Because the interface is much easier to use. Particularly for options, which are dangerously easy to trade with Robinhood compared to their competitors like Think or Swim.
it is misleading really. so many people who didnt understand legged , or options in general got into really bad positions which is hilarious to watch the revolving door
Maybe I’m wrong and there’s a better company that offers this, but the reason I use RH is so that I can trade both cryptos and regular securities out of the same account, with 0-day settlement on trades (without opening a margin account) since every RH account is an implicit margin account.
I also like the instant deposits that scale with account size.
RH’s trading hours for securities is more limited than anyone else, but I don’t find myself trading outside of those hours anyways.
I also don’t like their naive tax accounting and don’t expect them to handle wash sales properly, which are two very big negatives, but I haven’t found a better broker for my main use case.
While I am really glad Robinhood existed back when I started working to introduce me to investing, their amateurish ops (see their outages in the past few years) and customer support (they managed to bungle a position transfer costing me a few hundred bucks) pushed me to more established players. Most of these established players now have low to zero commissions with much better customer support, order execution etc. I doubt any serious investor uses (or should be using!) Robinhood.
Though they did have hiccups in trading peak GME/AMC.
It's refreshing being able to chat, or call a native english speaking call center where they will bend over backwards to help, waive fees, etc. No offense meant to ESL speakers, but I think we've all experienced 'support' that is hard to understand and communicate. I can't even get TCF on the phone.
It's not really an entirely new market, but definitely a "second wave" attempt to capture that market.
Back in the Web 1.0 boom, seemingly dozens of online brokerages (ETrade, Ameritrade, Scottrade, etc) sprang up overnight to fuel easy consumer access to the "meme stocks" of the day (Pets.com, Yahoo, etc).
Those are the new legacy players and I guess Robinhood is the new generation.
I've been a long time critic of RH but you can see the value to their business. They mainly target millenials who are largely shut out of the investment market because of their poor financial situations. Tiny portfolios and game-ified trading is a good way to capture that audience. Millenials won't stay poor forever so RH's customer base is actually quite valuable. A more mature company can either acquire RH for those customers or RH itself can transform into a more stable and reliable operation with a large customer base that will acquire more assets over time.
I don't really buy this argument, since you can sign up at most traditional brokerages for free, with no minimum balance, and zero or almost zero trading fees on most trades. There's absolutely no more barrier to entry than with Robinhood.
Agree with you on that. I don't see any advantages to RH at all but they were the first to really target that group and has already acquired them as users. That group of users is worth a lot and will be worth even more over time.
100% agree with you. Not at all condoning their business practices. I'm just saying their business has value because of their large customer base that they've already acquired. Its a customer base that becomes more valuable over time as millenials become wealthier and acquire more assets.
Most consumers do not want to pick up the phone these days. I do not trust that an inbound phone number isn't just a spam call. I get concerned that the number I get when I google "schwab support line" will turn out to be a fake line setup on a good looking website designed to harvest personal details.
I strongly suspect that the SaaS/consumer trend of having fewer human interactions will continue. The necessary caveat of this is that many firms will have less developed procedures for managing interesting situations.
They screwed up, but did they deserve the "largest penalty ever?" Established brokerage houses have gotten away with worse and paid less. Sounds an awful lot like another true real-life example of the very same r/WSB David/Goliath narrative the "established" part of the industry wishes it could discredit.
Its so difficult to say what is going on behind closed doors when established brokerage houses get caught(or any brokerage). In many ways it makes perfect sense that an established firm is able to negotiate for more lenient penalties, much like an established lawyer might be able to negotiate for more lenient sentences.
Egregious conduct is (and has been) punished by license revocation or revocation of FINRA membership. It may be the largest monetary fine ever levied but it certainly isn’t the harshest punishment.
12.6 million goes to customers, according to the article.
> Robinhood's resolution with FINRA includes $12.6 million in restitution to thousands of customers and a $57 million penalty, the largest in the regulator's history, and covers a range of issues dating back to September 2016, FINRA said in a statement.
I believe that FINRA keeps its fines and uses it for operating expenses, which are also partially funded by annual fees paid by its members and maybe other funding sources.
Note: This is not related to any activity relating to the gamestop/meme stock trading restrictions earlier this year, and was predominantly for their violations regarding proper trading controls and communications during 2018 to late 2020. This is a rather substantial fine in terms of those violations.
None of these fines (either meme stock fines or systemic failures/price improvement issues) are "substantial". It's not even a slap on the wrist for Robinhood, compared to the money they are making. They are probably clearing profits north of $70M in half a day.
“…and exposed them to excessively risky trading tools such as options”
Oh FFS. That was actually one of positive things that Robinhood did. They could have had some better safeguards for the unlimited loss scenarios to be sure but to lament access to all options is disingenuous at best.
Also important to know FINRA kept the 57 million. They are the SRO but let’s be honest they are the enforcement arm of the SEC.... but the government does not get to keep the fines.
When the "fine" is minuscule relative to profits and the bulk of it goes to a private company / self-regulatory organization (FINRA: [1]), it might be more accurate to label this a "bribe" for plausible deniability...
Gross profits, not net. Their net profit is probably negative, like most growth stage pre-IPO or recently-IPO tech companies. They were looking at IPOing at a $30B valuation. The fine is 0.2% of their anticipated market cap.
This isn't the first offense. They were fined $65M in Dec 2020 for similar infractions [1]. Clearly that wasn't enough to deter bad behavior. I'm a fan of exponential backoff. Pick an exponent. 3x-10x the last infraction seems reasonable (assuming similar levels of harm to users).
FINRA is the industry equivalent of a firm’s Chief Compliance Officer. They’re supposed to identify and correct issues at the expense of the industry rather than wasting the government’s limited resources. FINRA conducts regular exams of all members the way a Compliance Officer will regularly examine all department functions. Whereas the SEC conducts random periodic exams (like an auditor), targeted exams (like an investigator) and occasionally “sweep” exams relating to the topic du jour (usually in preparing to issue to a new rule).
With the number of fines this company has occurred in its short existence Im very surprised they are still allowed to be a brokerage of sorts and will be allowed to go public.
$70M is 0.625% of the conservative value of Robinhood[1] as of a year ago. That means they have over 99.375% of value remaining to work with. How is this not simply treated as "cost of doing business" in the finance world? They should be putting execs in prison when the law is blatantly broken.
Then they expect younger generations to blindly trust the finance system. Time is ripe for millennials to cash in their 401ks and find a new place to put it....where sticky hands can't touch it.
Firstly, this fine was issued by FINRA, not the SEC. Secondly, which laws did they break exactly?
This is a substantial fine for the scope of violations that were being investigated, as this has nothing to do with any of the gamestop restrictions earlier this year but their messaging, outages and vetting of customer expertise during 2018-2020.
It boils down to a $70M fine for not having a high avilability system, being bad at explaining trading concepts and allowing people to take risks that other banks would not. That's quite a reasonable amount.
Prison? Really? A lot of otherwise disadvantaged people have made life-changing money with RH. It offers education, research tools, and generally does a good job of being useful in supporting a proactive investing and trading habit.
I would guess that the real cost here is the publicity and reputation hit, not the fine.
Placing orders is not rocket science. I bought my first stock on etrade decades ago as a teenager from a lower class family. RH didn’t add much except a pretty UI and lubrication to make it more gamboling than it already was.
E-Trade, you mean the company that depicted a baby earning a stack of cash in a Superbowl ad?
Good anecdote and I'm glad you were able to figure out how to buy your first stock, but even the gambling community cried foul on E-Trade when it was brand new.
Robinhood's mobile app is known for its simple UI and improved charts over ET; it's much less cluttered in addition to being a good deal for taxable accounts + offering crypto derivatives.
The PFOF premium that Robinhood commands is really fascinating. Last I checked market makers were paying like double for RH’s flow as opposed to Schwab or whatever.
I’ve been doing work in crypto lately and it always creeps me how hard the exchanges push you to lever up. RH makes derivatives trading seem like free money. Citadel is willing to pay real money to be the counterparty.
“HFT” gets a bad rap in spite of often providing a necessary service, and a lot of that is because of Michael Lewis’s dumbass book, but there is a dark side where firms round up unsophisticated people and sell them the opportunity to engage in complex derivatives transactions with sharky pros via dark patterns and sketchy growth hacking.
I'm glad RH got fined, but this is a reminder that FINRA hasn't meaningfully fined the likes of Goldman, Morgan Stanley, HSBC or any other large brokerage.
And they aren't a retail brokerage with customer service obligations to ordinary people. Their counterparties are sophisticated, which is a regulatory way of saying "mostly on their own here".
With the number of people still mad at RH at how they handled gamestop, I'm excited to see what sort of market shenanigans wallstreetsbets folks engage in once they IPO. I predict massive put volume.
Assuming Robinhood's story was accurate that everyone was trading on margin (at least by default and thus a lot of traders) and that they were approaching some serious questions about if they had enough cash on had to cover the trades / possible losses ... I'm not sure what the right thing to do in that case would be.
Keep everyone trading and possibly run out of cash to cover everything? Or stop trading and possibly hose the folks trying to make trades?
The issue is not just trading on margin, it's trading with unsettled funds, which you can do in a non-margin account, because it's a non issue 99.999% of the time.
Because of T+2 settlement when you buy/sell stock the actual exchange of shares and money only happens 2 business days later. If you sell a stock and then buy a different stock the same day you're trading with money that technically is not in your account yet, even in a cash account.
It's fine because you wrote promissory note to pay $X in 2 days, but you're also holding a promissory note saying you are owed >=$X in 2 days. (And promissory notes to receive/deliver the respective shares). And there's a central clearinghouse enforcing this.
But part of the reason why it's low risk is that the clearinghouse requires brokers to put up large amounts of cash as collateral to ensure they can pay all their promissory notes even if they go bust. They are fairly conservative in their collateral requirements.
So when all your customers are trading a highly volatile stock with a notoriously high rate of failure to deliver (this is a whole other discussion), the clearinghouse gets antsy and may ask you to put up ridiculously large amounts of cash as collateral.
>Because of T+2 settlement when you buy/sell stock the actual exchange of shares and money only happens 2 business days later. If you sell a stock and then buy a different stock the same day you're trading with money that technically is not in your account yet, even in a cash account.
It's to do with T+2 settlement, but not with unsettled funds (funds you got from selling a stock, but hasn't settled yet). Basically, even if the funds were settled (eg. it's been sitting in your account for years), your broker has to put up the deposit on the day of trade, but can't use your money to do it. So if you bought $100 worth of shares and the deposit requirement was 100%, then your broker has to come up with $100 of their own cash (or borrow it from someone) to fulfill the trade.
>but our clearing firm simply cannot afford the cost to settle those trades. We cannot use customer funds to front that cost due to regulation. So the brokerages or the clearing firms have to go into their own pockets to do it. And they simply can't afford the cost of that trade clearance.
Say what? Why would brokers need to put up their own collateral to back customers’ long-settled cash? Because if the risk (to the rest of the market) that the broker doesn’t actually have that cash? That seems seriously messed up.
But wasn’t RH also prohibiting purchase even in non-margin accounts where the funds hadn’t moved at all for months and thus wasn’t going back and forth creating counterparty risk?
There have been several Congressional Hearings since January’s drama, and something definitely doesn’t add up.
Robinhood’s CEO stated, under oath, that they switched off buys of GME following discussions with the DTCC.
In a later hearing, the head of the DTCC stated — again, under oath and on the record — that Robinhood’s decision was entirely their own, and they had never spoken with Robinhood about it.
Someone is lying.
I would urge anyone interested in this (ongoing) saga to read this excellent investigative journalism piece here:
Or, both people are stating the story from their side, and there is context missing.
Robinhood: "We switch off after discussions with the DTCC [about increased reserve requirements which we could not meet]"
DTCC: "It was entirely their decision, we never spoke to them about [the explicit actions they would have to take. It's definitely a coincidence that most other brokers did the exact same thing]"
It’s clearly ambiguous. Retail investors were screwed over by someone, and there are thousands of people still following the situation, demanding answers.
Take a read of that article I linked, it gives an excellent and impartial summary of many of the conflicts of interests affecting all parties involved. It also brings up numerous issues I never see discussed here, given most people are only aware of the “mainstream narrative” — there is much more evidence being uncovered than most people are aware of.
That doesn't seem clear. Possible, but not for sure. Too much of this reads like hardcore conspiracy theorists, but maybe that's just biasing me against the legit bits.
They disabled the buy button when GME was over 400. But now the buy button is back and you can get twice as many shares for the same money. Sounds like a bargain!
The price was going up by $10s of dollars per minute in January.
It was a short squeeze of unprecedented scale — the first widespread opportunity for wealth redistribution of its kind, thanks largely to social media.
Where “Occupy Wall Street” failed, “Liquidate Wall Street” was winning.
The hedge funds blatantly rigged the public trading system to avoid bankruptcy. I can’t believe so many people still defend them.
They could have also said that they'll stop giving everyone secret margin trading accounts and tell users that any trade (due to market volatility) will take 2-3 days to close.
The secret margin accounts is a red herring. They need to put up deposit with the DTCC even for stocks that's "paid"[1] with settled funds, and they can't use customer funds for it. So if you bought 1 share worth $100 and the deposit requirement was 100%, then robinhood has to come up with $100 of their own cash (or borrow it from someone) to fulfill the trade.
[1] quotes used because settlement actually happens 2 days after the trade is made.
Other brokers without liquidity issues enacted similar policies. But you’re right, the fault doesn’t lie with them.
The blame should go toward the DTCC who increased their margin requirements on buyers for seemingly no reason other than to coerce everyone into stopping retail investors from squeezing the rich shorts.
>[T+2 settlement] means that the seller takes two days of credit risk to the buyer. I see a stock trading at $400 on Monday, I push the button to buy it, I buy it from you at $400. On Tuesday the stock drops to $20. On Wednesday you show up with the stock that I bought on Monday, and you ask me for my $400. I am no longer super jazzed to give it to you. I might find a reason not to pay you. The reason might be that I’m bankrupt, from buying all that stock for $400 on Monday.
The future price of the stock has nothing to do with anything. If I want a $400 stock, and you agree to sell it to me for $400, it is a done deal, is it not? The order is filled, regardless of settlement time or future price changes.
>The future price of the stock has nothing to do with anything
The quote in my previous comment covers that, specifically:
>I am no longer super jazzed to give it to you. I might find a reason not to pay you. The reason might be that I’m bankrupt, from buying all that stock for $400 on Monday.
Yes, I read it. You can’t cancel an order in settlement because you’re “no longer super jazzed”, else every order where the stock price increased would be cancelled by the seller so they could sell again at the higher price. Do you have any evidence that orders can be cancelled in settlement?
>Do you have any evidence that orders can be cancelled in settlement
It's not that they'll show up and say "on second thought I don't want that stock anymore, please cancel my order". It's that they'll go bankrupt in the meantime. This was already mentioned in the original comment.
>The broker doesn’t have some way to credibly lock up the money
They do, that's what the collateral is for. From the linked article:
>The way that stock markets mostly deal with this risk is a system of clearinghouses. The stock trades are processed through a clearinghouse. The members of the clearinghouse are big brokerage firms—“clearing brokers”—who send trades to the clearinghouses and guarantee them. The clearing brokers post collateral with the clearinghouses: They put up some money to guarantee that they’ll show up to pay off all their settlement obligations. The clearing brokers have customers—institutional investors, smaller brokers—who post collateral with the clearing brokers to guarantee their obligations. The smaller brokers, in turn, have customers of their own—retail traders, etc.—and also have to make sure that, if a customer buys stock on a Monday, she’ll have the cash to pay for it on Wednesday.
The catch here seems to be that the broker can't use customer funds for collateral (see my other comments in this thread), so the broker has to come up with the money themselves by drawing on lines of credit. If those lines of credit run dry, then they can't take any more orders.
Right, that’s what’s confusing. To rephrase, I’m hearing that brokers can execute some primitive operation <lock up> which correctly and credibly persuades the financial market that $X is available to settle a transaction.
But <lock up> is only a “valid operation” when executed with “the broker’s own funds”. Why? To whom would “locking up $X from broker funds” be a valid operation, but “locking up $X from client funds” wouldn’t be?
Your comments are saying “that’s just how it is”, but that’s not a reason. Is it a wholly arbitrary operation handed down from on high that accomplishes nothing? Is it a matter of the financial system not being able to trust client-originating money?
>Is it a matter of the financial system not being able to trust client-originating money?
Yeah pretty much. If every trader had their funds sitting in one place (with the clearinghouse or the fed), then the clearinghouse wouldn't need a deposit system since they can easily validate whether everyone has the funds.
>I still don’t get the model whereby <lock up> is unsafe with client funds but not broker funds.
"unsafe" is the wrong word here. That would imply the clearinghouse doesn't think the collateral is as good if it came from the customer rather than the broker. This isn't the case. The requirement to use broker funds is not to protect the clearinghouse, it's to protect the customer in case the clearinghouse seizes the collateral (as they're allowed to do) when things go south. By using broker (or their creditor's funds), the customer's funds aren't at risk.
So ... the clearinghouse is perfectly capable of seizing collateral and running off without delivering the promised shares, but client funds "aren't at risk" when the broker puts up separate collateral, even though the clearinghouse could seize that just the same?
Why wouldn't they be? You said the clearinghouse could seize the client purchase funds just as well as the collateral. Why couldn't they seize both? At the very least, it's a bizarre threat model that the clearinghouse can seize both, but it will only ever seize collateral (which is what your claim requires to make sense).
That is, it's some kind of capricious being capable of seizing and willing to seize any money trusted to them, with no recourse, but somehow the presence of collateral makes it all better, even though that could be seized too.
>Why wouldn't they be? You said the clearinghouse could seize the client purchase funds just as well as the collateral. Why couldn't they seize both?
Regulations? Presumably customer funds are segregated from company funds, so the company and the clearinghouse can't raid it if they need money.
>At the very least, it's a bizarre threat model that the clearinghouse can seize both, but it will only ever seize collateral (which is what your claim requires to make sense).
>That is, it's some kind of capricious being capable of seizing and willing to seize any money trusted to them, with no recourse, but somehow the presence of collateral makes it all better, even though that could be seized too.
by "seize" I don't mean the clearinghouse can walk into the offices (or bank accounts) of any of their member and grab whatever they want. They're seizing (or more accurately, refusing to return) the deposit that the member sent on the day of trade.
>Regulations? Presumably customer funds are segregated from company funds, so the company and the clearinghouse can't raid it if they need money.
Okay, and again, if "regulations" are enough for one case, why not the other? If a "regulation" can prevent the clearinghouse from holding on to asset they're not entitled to, why not use that instead of requiring the broker to put up money that will compensate the customer when the CH holds on to an asset they're not entitled to?
>by "seize" I don't mean the clearinghouse can walk into the offices (or bank accounts) of any of their member and grab whatever they want. They're seizing (or more accurately, refusing to return) the deposit that the member sent on the day of trade.
>Okay, and again, if "regulations" are enough for one case, why not the other? If a "regulation" can prevent the clearinghouse from holding on to asset they're not entitled to, why not use that instead of requiring the broker to put up money that will compensate the customer when the CH holds on to an asset they're not entitled to?
But the clearinghouse is entitled to it. The clearinghouse member's collateral is used to make up the difference (the credit risk) should the member fail to pay the required amount on the day of settlement. If you prohibit the clearinghouse from seizing it, then that kills the point of the collateral.
Yes, obviously the CH should seize assets they’re entitled to. I think that you forgot we were talking about the case where they seize money they’re not entitled to. (Which is how we got to talking about the need to protect the client from that, and why the broker has to put up the extra collateral, and how “regulations” stop that money from being misappropriated but somehow not the client funds.)
I think we’re going in circles. And if I may give some unsolicited feedback, if I understood this topic as well as you’re claiming to, I probably would have given answers that avoided reaching that point. If I didn’t, I would have confessed as much, earlier in the thread, once I started giving your answers.
Robinhood is and has been manipulative and predatory for years.
Arguing that Robinhood did illegal things "for the benefit of their banking partners" or whatever other conspiracy theory you're suggesting is just that, a conspiracy theory.
Let Robinhood be punished for the terrible things they have actually done instead of pointing at provably-false boogeymen.
Brokers have a duty of care and I can imagine Finra investigating if they took good care of their clients during this period, no matter the reason behind it.
Suggesting that a group should be investigated for "their actions" without providing any specifics is straight out of the conspiracy-theory playbook.
Any rebuttal is easily countered with "that's not the action I was talking about. I was referring to their other illegal actions."
You're setting up a non-falsifiable argument, which is the basis of a conspiracy theory. You're throwing out non-specified accusations and expecting your non-specified accusations to be disproven.
I'm out of the loop on what Robinhood did, and the news articles on this fine seem to be a bit vague. What did they do that is manipulative and predatory?
1. They released a "checking account" that they claimed was FDIC and/or SPIC insured when it was not. (yes, they backed off of this one when they got caught).
2. They've gamified buying/selling stocks using addictive dark patterns (like confetti explosions). FOMO-inspiring push notifications are another example here.
3. They have such a terrible level of support for a product which involves people's real money.
4. They let people start trading options without any of the due-diligence typically performed.
5. They released an initial options product which was quite literally "Do you think this stock is going to go UP or DOWN?"
6. Their entire product is based on people having margin accounts that do not know that they have margin accounts.
7. Their Payment for Order Flow is (or at least was) significantly higher than industry standard.
Overall, their business model is taking a variety of complex financial instruments and wrapping them up in lipstick to sell to people who overwhelmingly do not understand the thing they are actually buying (or selling).
I'm sure I'm forgetting a couple but I'm also multi-tasking at the moment.
Edit:
I forgot about the "infinite money" "glitch", which was a situation explicitly called out in regulation as prohibited (regarding counting outstanding margin credit as assets when calculating margin credit)
> 7. Their Payment for Order Flow is (or at least was) significantly higher than industry standard.
Just to elaborate a bit, with payment for order flow the broker essentially gets a kickback for executing a trade with a particular firm. They pass on part of the kickback to the customer as a rebate, and keep some of it for themselves.
Robinhood was (is?) keeping a bigger cut for themselves than other brokers who do payment for order flow (practically all retail brokers at this point, I guess), while advertising that they have the best execution.
If I remember right, they didn't get dinged for keeping a bigger cut because that's not necessarily illegal, they got dinged for lying about it - you can't say you have the best execution in the industry if you're taking more hidden fees than everyone else.
Many of your points were being lauded as good things just a year ago. "Robinhood made advanced financial instruments accessible to the average Joe" now that the average joe has continuously shot himself in the foot, people are realizing it might not have been the best idea.
How's this for some proposed legislation/regulation: Anyone who wants to use a share trading service has to first complete a one month "training period" where they use the service with virtual money only. The UI would be exactly the same, but you couldn't top-up or cash-out your balance.
The catch, though, is that you "fail" this training period if you don't make a profit (or enough trades) during that month. You are also prevented from attempting another training period with that service (or any other service) for another 11 months.
This would have the dual effect of locking out the large proportion of users who don't know what they are doing, and also preventing a sudden influx of users from taking advantage of (or falling victim to) some meme scheme that generates a lot of short-term media attention.
Making money on trades within a month doesn't tell you whether you know what you're doing. It only tells you if you're lucky.
We should not be encouraging day trading. A better test would be if you put the money in non-penny/non-meme stocks and didn't touch it for the remainder of the month.
The FDIC-insured nonsense alone perplexes me. There is no web to spin here that favors them.
Did they really think they could get away with this? Or did they have a severe cascade of miscommunication? It is incredibly irresponsible and careless behavior either way.
It's neither good nor bad, but robinhood also simplified the UX to quote the bid ask midpoint as the "price", then attracted a great many poorly informed speculators who like to trade illiquid options on shitstonks with wide spreads, who then complain the "price" moves when they submit order. Outrageous front running!
The combination of robinhood's ineptness and their users ignorance created an environment in which a lot of crazy thrived.
They are paid to route their order flow through the same firm that is heavily invested in shorting GameStop. The specific action I’m referring to is the banning of buying any more shares of $GME. Assuming everyone was playing by the rules, there should be no reason why margin requirements would increase for buyers of a stock but not for the shorts whose collective positions had recently become net-negative in the $10,000,000,000+ range.
Robinhood may have simply been coerced to do this, but regardless, it eroded my trust in their ability to provide me with any share I want in any quantity I can afford. I and many other retail investors switched to bigger firms that won’t have liquidity issues, or enact arbitrary restrictions on stock purchases because of those issues or their close relationships with the billionaires on the other side of the trade.
> no reason why margin requirements would increase for buyers of a stock but not for the shorts
There are tons of reasons why (counter-party risk, correlated risk of brokerages with high exposure, T+2 settlement, etc). You seem particularly keen on ignoring them though.
> Robinhood may have simply been coerced to do this, but regardless
Please stop ignoring known facts in favor of your conspiracy theory.
> I and many other retail investors switched to bigger firms that won’t have liquidity issues
It is completely logical that larger brokerages will be able to weather liquidity issues more easily. If this was super important to you, going with the discount brokerage was a poor decision in the first place.
>there should be no reason why margin requirements would increase for buyers of a stock but not for the shorts
source for margin requirement only increasing for longs but not shorts?
Some non-nefarious explanations I can think off the top of my head:
* hedge funds and their prime brokers has much easier access to credit than retail brokerages, which allow them fulfill their deposit obligations than a discount brokerage
* since the hedge funds shorted GME a long time ago, the trades were already settled, so they're not subject to any deposit obligations (since deposit obligations only exist for unsettled trades)
> which allow them fulfill their deposit obligations than a discount brokerage
Not even just easier access to new capital, but you can be sure they are able to move money faster than someone doing an ACH transaction to Robinhood that would take multiple days to actually settle.
They didn’t do anything illegal during that time. There is nothing illegal about restricting highly volatile equities pretty much every brokerage does this. Don’t know how many times this has to be said here before people stop making this accusation
I am talking about the people at the top. They are making calculated bets with their criminality (and look, it keeps working out really well).
Will we be able to replace imprisoned CEOs who knowingly and intentionally perpetrated crimes? I think so. Silicon Valley CEOs are much more replaceable than some would have you believe.
There always has to be a ruling class according to Orwell. But that isn't a bad thing necessarily, and i'm sure that any peasant from any period would happily sell his left arm to enjoy the privileges we all enjoy.
>Now I know what it felt like to live during the dark ages.
really?
>Massive hypocrisy all around.
Hmm. (i'm not attacking you personally, i'm also a terrible hypocrite, but trying to put things into perspective)
>> i'm sure that any peasant from any period would happily sell his left arm to enjoy the privileges we all enjoy.
Not sure about that. Who would hire people with such low level of education? They'd have a miserable time living in tiny, dark apartments in big cities filled with noises, air pollution, drugs, with only mind-numbingly boring, repetitive jobs available to them with everyone around them acting fake, fake relationships, nobody would want to date them, nobody would want to be friends with them, etc... They would think we have all gone insane... And they'd be right. They'd be begging to go back to simpler times. Modern times are only better for rich psychopaths who don't value genuine human relationships. It's worse for everyone else.
I'm jealous of peasants from the middle ages. There were so few educated people back then. I suspect that very few people tried to better themselves; so if you did, you would quickly stand out. I bet it was far easier to feel a sense of fulfillment (I know my grandparents felt this way). Business was less competitive and, unlike today, everyone knew how to identify an intelligent person (teachers and books where hard to come by so you had to be very curious to become educated).
Nowadays a lot of educated people have 0 curiosity (the education system has turned into a factory) and these people are destroying the sciences.
People without curiosity see education merely as a tool to gain money and power and that's probably why we have such terrible tribalism today. Few educated people are interested in the truth these days. They prefer to use their knowledge to mislead and control people rather than to teach them and to learn from them.
I switched to Charles Schwab and just the fact that there's a 24/7 phone number compensates for the lack of simplicity. I used to think that I wanted the simplicity of something like Robinhood. But I have learned to appreciate the complexity of Schwab. The reality is that behind Robinhood's simplicity there's a lack of sophistication and process in their operation.
I commend what they built, but Robinhoood it's too exposed to the cross winds of retail trading and regulatory scrutiny. I feel that by having my investments in Robinhood, I'm adding some sort of risk multiplier that has nothing to do with the nature of my investments. It has to do mainly with how amateur-ish their brokerage operation feels.