Thoughts on Robinhood's Trade PMR Deal.

It’s January 28, 2021, and the financial world is on fire. At Robinhood’s California headquarters, Vlad Tenev and his top lieutenants scramble to navigate the fallout of a decision that would define the company’s reputation: halting trades of GameStop and AMC during the peak of the ‘meme stock’ frenzy. Retail investors feel betrayed, lawmakers demand answers, and Robinhood is desperately managing liquidity issues. Critics point to payment for order flow—the revenue engine driving Robinhood—as a model that prioritizes profits over users. Now, this same company is vying to be your custodian.

Robinhood made waves in 2015 by pioneering commission-free trading, democratizing access to financial markets for tech-savvy retail investors. By the end of that year, the platform had processed over $2 billion in transactions, establishing itself as one of the fastest-growing brokerage platforms in history. Fast forward to 2024, and Robinhood is making its boldest move yet: entering the RIA custodial space with its $300 million acquisition of TradePMR.

On paper, the synergies seem obvious. Robinhood brings scale, tech expertise, and a massive retail user base, while TradePMR offers a trusted RIA custody platform. But the reality is far more complex. Robinhood’s audience skews toward speculative investors and crypto enthusiasts—not the type of clients who typically engage financial advisors. And advisors, who prioritize trust and stability, may hesitate to align themselves with a platform associated with gamification and high-risk retail trading.

The execution risks are significant. Custodial conversions are complex, requiring seamless integration of advisor tools, middle-office systems, and support for account types like trusts—none of which Robinhood currently supports. To succeed, Robinhood must either deeply integrate with the tools advisors already rely on—such as CRM platforms, portfolio management software, and financial planning tools—or build these functionalities themselves. Both options are challenging. Integrating new tech with legacy systems is notoriously difficult, often leading to clunky workflows and frustrated users. At a large publicly traded company, building these tools in-house requires expertise and years of development.

My view? Robinhood is unlikely to pursue a full platform approach. Instead, it will probably deliver a sleek app that focuses narrowly on investments, allowing advisors to do some percentage of what they’re already doing through platforms like Schwab, but with a more tech-enabled interface. While this may appeal to a subset of users, it risks falling short of the holistic functionality advisors need to serve their clients comprehensively.

Advisors require more than a slick investment solution. User-friendly interfaces and streamlined account opening are quickly becoming table stakes. To meet the holistic needs of their clients, advisors need platforms that integrate tax planning, estate planning, insurance, and other ancillary services. Without these, Robinhood risks offering a narrowly focused platform that doesn’t solve the broader challenges advisors face in managing their clients’ financial lives.

This is why we built Wavvest. As advisors, we’ve seen firsthand the frustrations of working with outdated tools that weren’t designed for the next generation of wealth. Slow account setups, clunky interfaces, and poor digital integration have long plagued the industry. Wavvest was created to solve these problems, providing a seamless, intuitive platform that integrates investments, financial planning, tax planning, estate planning, insurance, and more—all in one cohesive system. We’re empowering advisors to engage the next generation of wealth with tools that actually enhance their workflows, not complicate them.

Robinhood’s move into wealth management will undoubtedly push the industry forward, just as it did with commission-free trading. But innovation without a deep understanding of advisors’ needs isn’t enough. Building a slick app is one thing; earning the trust of advisors and their clients is another. Robinhood has the resources and talent to build a respectable platform, but its lack of advisor experience and the challenges of integrating legacy systems could hinder its success.

Still, the market seems optimistic about Robinhood’s ambitions. As Keith Gill, aka Roaring Kitty, famously said, “I like the stock.” Whether this gamble pays off remains to be seen, but one thing is certain: the wealth management industry is ripe for disruption, and Wavvest is ready to lead the charge.