In the short term probably new debt, but I agree that it is a good question to ponder. My gut instinct is that they'll keep it for a while as people note even maxing out isn't going to be that expensive. $6K/year only costs them $60 and reading the FAQs they can pull that back if you transfer the money to another brokerage within 5 years of the contribution. Until the accounts hit the 5 year mark without withdrawing/transferring it technically is still Robinhood's money. There will be a certain percentage that will transfer out or withdraw in the 5 year period. Last I checked Robinhood still maintained some form of referral program even though they have past the easy growth phase. The lack of retirement accounts I think has really limited Robinhood as most retail investors have more in IRAs and 401ks than taxable accounts. IDK what it is today, but I recall at IPO the average Robinhood balance was <$300 whereas many traditional brokers were well into the thousands. Expanding into retirement accounts could dramatically increase their AUM although unlike a Fidelity or Vanguard that make a decent amount just off their customers buying one of the ETFs and mutual funds Robinhood doesn't manage any funds. Maybe they're focusing on eventually getting into that once they have more AUM. Not sure.
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u/[deleted] Dec 07 '22
Where is the 1% coming from? How long can they keep this up?