With trading activity and the tempo of recent person signups each in decline, and SEC chief Gary Gensler seriously considering a ban on its core innovation, payment for order flow, Robinhood is determined for a return to the explosive progress of 2020. So it is turning to the demographic that has traditionally been its most dependable cohort of consumers: youngsters and twenty-somethings.
With millennials already firmly in its camp, Robinhood is stepping out to try to recruit the up-and-coming Gen Zers by launching a university tour like they’re ESPN College Game Day. Robinhood executives are planning to tour group faculties and Historically Black Colleges and Universities this fall. Before that, the corporate is launching a brand new promotion: join with a university or college e-mail, and you’re going to get a free $15 to commerce with (you should purchase shares, choices, crypto – no matter) whereas additionally being entered right into a sequence of drawings for $20K.
Already, younger individuals make up the majority of Robinhood’s person base. The median age of its customers is 31. More than half of its customers have not had a earlier brokerage account. And practically 4MM of them are college students.
As traders in all probability keep in mind from Robinhood’s lackluster earnings report, the corporate must do no matter it may possibly to bolster buying and selling exercise (so each it and Citadel, its largest consumer, can proceed to prosper). Some scoffed at Robinhood’s boldness in focusing on the younger and inexperienced.
— Spencer Jakab (@Spencerjakab) September 15, 2021
When requested by WSJ, Robinhood’s prime flack defended the school push, arguing that Robinhood was merely assembly its clients “where they are”.
Aparna Chennapragada, Robinhood’s product chief, stated that the advertising and marketing push is a continuation of Robinhood’s long-term mission to make investing accessible to individuals who hadn’t traditionally participated within the markets. The marketing campaign, she stated, is about “meeting the next generation where they are” and speaking that by beginning younger, school college students can take pleasure in the advantages of compound returns over many years.
The drawback is that Robinhood’s app has been accused of “gameifying” investing, incentivizing unsophisticated traders into taking dangers they would not usually take, or that they do not absolutely perceive. Robinhood is presently being sued by the household of a 20-year-old dealer who racked up an enormous debt whereas buying and selling on the app.
Robinhood has additionally defended its outreach to younger individuals as a part of its mission to develop entry to investing to individuals who did not have it beforehand (on this case, youngsters).
Still, it is exhausting to disregard that the $15 in free buying and selling cash and different incentives appears like a lure to lure extra harmless teenage and 20-something novice merchants into the market, the place they are often swiftly fleeced by Citadel and Robinhood’s different client-partners.
Speaking on CNBC on Wednesday, Gensler identified that “most of your trades are going to a small handful of wholesalers…and that’s not the lit markets of Nasdaq and New York Stock Exchange that we know.”
Asked instantly about school college students and younger individuals buying and selling meme shares is a “concern to you,” Gensler added that “I think it’s positive that more Americans are investing in the market…but investing in the long run is different from day trading…on the app.”
“It’s better to invest for the long run than try to day trade or hourly trade.”
When Jim Cramer requested about educate clients concerning the risks of buying and selling, Gensler stated the SEC and the media have to do all the pieces they will to get the phrase out and “protect the public.”
While the client has a proper to commerce when and the place they need, Gensler hinted that Congress may quickly tackle apps that lure teen merchants to commerce in ways in which maximize “profitability” (ie buying and selling exercise). “Even disclosure might not be enough,” he added.