Robinhood Taps Into AI with Acquisition of Pluto Capital

Artificial intelligence has graced us with a booming, tech-heavy stock market and the Pope in a puffer jacket, but it still remains dicey territory when it comes to investing. 

The online broker dealer Robinhood is trying to fix all that with its latest acquisition of the AI investment platform Pluto Capital, which the company hopes will help provide better tools and advice to clients. And while the Menlo Park, California-based company made its name in self-directed day trading, it may have taken a step closer to its goal of offering cheap financial advice.

AI, Are You OK? 

Robinhood, whose share price is up 82% year to date, has begun dipping its toes into becoming a traditional financial services provider. Last year, it began offering traditional and Roth IRA accounts, and this year it created Robinhood Gold — a premium subscription service that also has its own credit card:

• CEO Vlad Tenev said the goal is to someday provide “high-end financial advice at an attractive price point using modern technology and make that available to everyone,” The Wall Street Journal reported last year.  
• However, at the very low end, managed brokerage accounts might have a minimum asset threshold of $25,000. The average Robinhood account size is just $4,000. So it will be interesting to see exactly how “attractive” Robinhood can go.
• Tenev said that when the company does push into financial planning, they “definitely don’t want to build another me-too robo that just puts you into a basket of ETFs.”

Robinhood didn’t specifically say its acquisition of Pluto would be the first step toward AI advisory services, but it did highlight how the deal will provide users with personalized strategies for “a new era of intelligent, data-driven investing.” The deal comes on the heels of Robinhood’s purchase of crypto-exchange Bitstamp. 

It’s Ain’t Easy Being an AI: Advising is also very expensive work, requiring paying real people for their real expertise. Costly hires and poaching doesn’t look to be the game plan for now as Robinhood has had three rounds of layoffs in the past year, most recently cutting 7% of its workforce in May, improving its profitability.

Plenty of other fintech firms are taking advantage of AI. Acorns acquired two AI-startups — Harvest and Pillar — in 2021. Fidelity offers users access to Capitalise.ai through its Active Trader Pro software. And Webull touts its Prometheus as “an absolute game changer.” 

Just last summer the SEC proposed putting limits on brokers’ use of predictive data analytics, AI, and machine learning, while the Financial Industry Regulatory Authority recently raised concerns about the tech’s accuracy, privacy, bias, and security.