Robinhood Targets Wealth Management with TradePMR Deal

Robin Hood famously stole from the rich and gave to the poor, but Robinhood, the free trading app, is looking to court them both.

Wealth management is one of the fastest growing sectors in financial services, and the Menlo Park, California-based investing platform is the latest to enter the field. This week, Robinhood signed an agreement to acquire TradePMR — a provider of custody, technology, and portfolio management tools to registered investment advisors — for $300 million, according to a statement. The Florida-based company has more than $40 billion in assets under administration and works with roughly 350 firms. 

The move could help Robinhood tap into the Great Wealth Transfer and solidify its place in the $7 trillion RIA market. 

Getting in the Game

Robinhood made its mark as a discount brokerage for retail investors. Now it wants to connect its 24 million users with advisors, and in the process, build out its wealth management services. It also plans to build a platform for advisors and clients to view their managed assets alongside their self-directed investments. “RIAs will be able to offer more inclusive financial solutions that cater to a wider demographic,” Robb Balwdin, TradePMR CEO, told The Daily Upside. 

The competition is already quite fierce with Charles Schwab, Fidelity, and Pershing controlling the majority of the market. Robinhood plans to stand out by targeting younger investors, who are less affluent but poised to accumulate wealth:

• The company said it will create a “best-in-class” referral system, so users can easily find RIAs.
• After its purchase of Pluto Capital this past July, Robinhood also may explore creating a robo-advisor next year. 

The timing is ideal for Robinhood, said Forrester senior analyst Vijay Raghavan. The $84 trillion is being transferred between generations and the company’s user base skews young. Some 75% of its customers are Millennials and Gen Zers. “This cohort also began investing earlier than prior generations, they are digitally savvy, and are reaching an age where they will need more financial advice,” he told The Daily Upside.

Validate My Parking. Many Robinhood users also fall into what Forrester calls “validators.” They’re investors who gather their own information, make independent decisions, and tend to deal in riskier securities like cryptocurrency and options, but still want validation from experts.

The group is also the largest and youngest segment of US investors, so Robinhood’s customer base is a valuable one, Raghavan said. He expects more discount firms like Robinhood to make similar moves into wealth management.