- What in the world is going on with Robinhood?
They have had some recent press releases coming out.
They've been in the news
for reasons that they should not be.
And I have some legitimate concerns.
A lot of people have some legitimate concerns
on what is going on.
So for those that are new to the channel,
you know, I have a Robinhood account.
I have spoken very highly of Robinhood.
I love the fact that you can start investing
on their app or on the desktop with ease.
I mean, it's simple to open account,
get invested, start buying stocks,
and you can do so in less than five minutes.
And I love that, you know,
for all those that have, you know, issues
or have some lame excuse not investing,
Robinhood is one of those investment apps
that remove any of those barriers,
any of those obstacles.
Nonetheless though, I mean,
there's some things going on
that are making a lot of people feel very concerned.
And so just for those, like just to be 100 transparent
like I am a Robinhood client,
I have my investment account right here.
You know, this is my account,
I currently have just over $200,000 with them.
So it's not like I've got a small $500 account, you know,
I've got over 200,000 in there
and just recently, so why this all started was for me
I got an email just a few days ago
and I read over the email,
initially I just kind of glanced over it
and it didn't seem like a big deal
but then I read it again and I thought, wait a second.
What, 'cause the way that this email was composed
it didn't really, it just kind of glossed over like
what a big deal this was.
So here was the email that I received from Robinhood.
And here, you know, hey
we just wanted to let you know, you know,
just like like a good old friend,
you're just gonna let me know that
on starting on January 11th,
you'll no longer be able to buy closed-end funds,
limited partnerships, master limited partnerships,
royalty trust, tracking stocks,
New York registry shares and units on Robinhood.
Please note that you'll still be able to see,
to sell what you own at any time.
And it gives this really lame excuse
as to why this is happening.
We're currently in the process of phasing out
certain types of securities of Robinhood
and they just basically just repeat themselves.
Okay, so I've learned,
so I was watching a video by Joseph Hoagie
you should also check out his channel,
he just did a video on this.
I think just a couple of days ago
I'll have a link in the description to check out.
So he didn't get this email.
And I think it's because he'd already moved
a lot of his investments off of Robinhood.
Now, the reason that I got this email
as I've learned from his video is that
I purchased a closed-end fund
called the Gabelli Equity Trust
and I mentioned this close-end fund
in a previous passive income video.
And you can check that video out,
I'll have a link in the description,
so you can check that out.
But so I purchased this, I'm not a huge,
I'm not a big closed-end fund advocate.
You know, I bought this one because it paid a dividend
and it was currently trending on a dollar price
so I thought it was a decent time.
I didn't pick up a huge position.
I think right now I put $5,000 in
and it looks like I got a little bit of a gain.
So 5,000 and it's right now,
it's currently worth 5,900.
So up 900 bucks there.
So anyway, so for many, maybe close-end funds
aren't a big deal,
but for the master limited partnerships
I mean, for those that are seeking dividends like
that is a big deal because
you're typically looking at stocks
that are paying nine, 10, 11%
usually in that double digit dividend return.
And maybe you don't see that as a big deal because,
oh, I don't buy those, I really don't care.
You know, doesn't really affect me.
But if you do have a Robinhood account
this is why I think you least wanna be concerned
about what is going on
and why these changes are happening.
And because listen, Robinhood, you know,
they have positioned themselves
as a disruptor in the financial services industry.
You know commission-free trading
and they really gamified the app
so that it made it really easy to invest.
Well, they've been raising a lot of money
in Nokia as an example,
I think here this is back in August, I believe,
and they raised another $200 million
for a check at a valuation of $11.2 billion.
So they're planning on going public like that.
That is I'm sure the end result, you know,
this says this year alone, California
they've raised 800 million funds for the entire,
just for 2020 alone.
So they're going to go public,
their valuations is 11.2 billion.
So then the question is,
why are they getting rid of some of the offerings
that not just online brokerages are offering
but like all the big hitters.
You know, you got the TD Ameritrade's
and the Schwabs and all, Fidelity,
you know, you can buy closed-end funds
you can buy limited partnerships.
There are no limitations on what you can buy.
So why is Robinhood and when they've raised so much money
why are they getting rid of these types of securities?
And just the way they went about
it was just really odd.
It was just like, oh, cover, oh, by the way.
You know but this isn't the first time
that Robinhood has got into trouble.
You know, earlier this year,
they really, really took a lot of,
they got a lot of bad press.
I think this article originally appeared in Forbes
but talked about this young man
a 20 years old and he committed suicide.
And the reason he committed suicide was because
he was trading options in his Robinhood account
and on his app, it showed that he had lost
like he was down like $730,000.
And I can't remember exactly how much he had invested.
It wasn't that much
but he really wasn't down that much.
It was because that the options didn't have time to settle,
so it was just showing a potential loss,
even wasn't a real loss
and they would have waited until the next business day,
it would have shown this.
If you wanna learn more about this
I actually did a video, you know,
talking about what happened and you know
what the big misunderstanding here was.
And that's really what it was.
It was a big misunderstanding where
and a lot of people were angry at Robinhood because
the way that the information appear on the app,
I mean, it did look like he was down
but had to just wait until the next business day,
the other options that he also had
would have basically canceled it out,
showing that, I don't know if he was up or down
but it definitely wasn't down $730,000.
So that was one of the big issues
that happened at Robinhood earlier.
And then, well, do I mention that now?
Yeah, I guess we could say this, but you know
they also are losing some market share.
There was another company public
I think it was called,
I'm not really familiar with them
but another company that I think many people
are familiar with, because if you're on YouTube
watching any investing videos, you hear a lot about Webull.
And initially I dismissed Webull
because I'm like, you know, you got Robinhood
and M1 Finance and all of these others,
but man you got to also figure,
I don't want to misquote this
but I'm pretty sure one of the founders
or one of the big investors into Webull is, you know,
the dude Jack Ma who is in the Alibaba.
And I mean, there's a lot of money.
And like they are putting a lot of money,
banking a lot of stakes that Webull
is going to come out competing.
And you know, they have
Robinhood has lost thousands of clients
of traders over to Webull.
Now, is that something that's going to stick?
Oh, we don't know.
You know, one of the reasons why, you know,
Webull just adopted a similar strategy,
a similar marketing strategy that Robinhood was doing,
you know, offering free stock.
So you sign up for an account, get some free stock.
And right now they do have this promotion
that you can take advantage of.
I'll have a link in the description.
Also check out the first comment where right now
if you open an account, Webull,
if you open an account, you get two free stocks.
If you deposit $100, you get two more free stock.
And total value potentially is up to $3,700.
Now I will say, I have got some free stock from Webull,
I've not anything over $100 yet.
So, you know, they did say here, I mean,
I'll just read you the text.
Each value between eight to $1,600.
I think the largest stock
that I've received so far is about 30 bucks.
So just keep that in mind.
I did get my for free stock
but definitely wasn't $3,700
even though that is kinda what the marketing is going.
But, you know, Webull is making a really, really big push
not to mention the fact that, you know, Robinhood,
you know, if you look at their platform
and right now that, you know,
this is the desktop platform
which at first glance, you know,
it's really clean, a lot of white space
but when you compare it to other platforms
that are really into trading
and looking at trend analysis
and looking at charts and all that stuff, you know,
Robinhood is really lacking in that.
You know, they made it really simple to get investing
but it made it almost too easy
and is the right education there
where people can know what they're doing,
especially when we're talking about a lot of money,
you know, and then you look at the,
what happened to the 20 year old
that committed suicide as well.
So that is, you know, just one of the knocks against them
but you know, the other and this just happened,
I believe it just came out today.
So Robinhood, they, what do you call it?
Pleading no contest.
They agreed to pay $65 million to settle an SEC probe
over misleading communications with customers.
And it goes on to say,
I'm actually gonna read the press release
and I'll have a link to all these articles
if you want to check them out.
So this was the press release on the SEC's website,
let me make this a little bit bigger.
I don't wanna read the whole thing,
but I'll read let's see this bite at the SEC's order finds
one of Robinhood selling points to customers
was that trading was commission free, you know,
which is like, hey, you can buy any stocks, no commissions
but due in large part to it's unusually high payment
for order flow rates,
Robinhood customers orders were executed
at prices that were inferior to other brokers prices.
Despite this, according to the SEC order
Robinood falsely claimed in a website FAQ
between October 18 and June, 2019
that his execution quality mashed
or beat that of his competitors.
The order finds that Robinhood had provided
inferior trade prices
that in aggregate deprived customers of $34.1 million
even after taking into account the savings
from not paying a commission.
So that is a mouthful.
So basically what is going on here, right?
Robinhood is marketing zero commissions, free trades.
So you open an account
and you start making trades,
you started buying stock in your Robinhood account.
You're like, oh, look at me.
I am getting free trade, I don't pay a commission.
But essentially what's happening here is that,
let's say that you wanna buy a stock
and it's currently trading at $15
and you a market order in
meaning that you don't actually set a specific price
on what you're gonna pay for that stock.
So you put that a market order in is going to execute
at whatever the best market price is.
And we're talking like, these are like,
you're talking about fractional shares.
I mean, these are like fractions.
Have you ever seen the movie,
is it Office Space, Office Space
you know, with the red stapler, I've got a red stapler
you know, where they're siphoning off,
like just these pennies,
ends up becoming like millions of dollars
essentially though is that
you think that you're paying
what is like the best price for that stock,
but in truth you might be paying, you know,
$15 like 1 cent more than you should be paying
or a couple of cents more,
which might not sound like a big deal,
but when we're talking about a lot of trades
at a high volume that is where
people aren't getting the best price.
So yeah, you might and maybe that example
isn't the best example
but I think you get the idea
and maybe it's a larger amount
instead of $15 maybe it's like you're paying 15 a court.
I don't think it's that much
because I definitely think the SEC
would catch on to that even more.
But they caught on to something enough
where Robinhood agreed to pay once again, $65 million.
They didn't even say,
yeah like they didn't try to fight it,
they didn't try to argue it, they just said, yep,
we're not gonna plead guilty
but we're just gonna go ahead and pay the $65 million.
So you got the fact that, you know,
they've already had some issues this year,
you know, with the suicide thing, the 20 year old.
I mean, it's a tragic story, especially when, yeah.
Obviously there might've been some more going on
but the fact that he wasn't even down,
like he didn't even lose any money,
but that's what the app showed.
And like I tell you what?
Even though I have a decent understanding,
you know, how investing works,
I don't do a lot of options
but if I were to open my account and saw I was down $730
like I would've had a freak out myself.
I'm not saying I would've killed myself,
but I would have been very, very, very stressed.
And I think you can also agree with that.
So you got that, you got the fact that,
you know, this weird email and this was on their website.
You can look at the FAQ
it says an investments you can make on Robinhood
and it's just so like, well, okay, here's what we have
and here's now what we don't do.
And I mean, you compare like the three bullet point item
of what they do versus all the ones now that they don't do
and you just compare that
to all the other big hitters out there.
I'm trying to figure out they've raised so much money,
you have a company that is now valued at 11 billion
but yet you don't even offer what everybody else offers.
So just, I have some concerns about
what is going on, why,
you know, why this is going on.
I'm not ready to close my account yet,
but you know, definitely I'm looking at
why I have so much with them.
Now, I don't want you to freak out think that, you know,
Robinhood is going to,
if you have money with Robinhood
you're gonna lose all your money that's invested with them
because they do have the coverage,
which is the SIPC insurance.
This is very similar, like FDIC insurance
like that you'd have with the bank essentially.
Now this does not cover if you pick some bad stocks
and you lose money and is covered,
this essentially covers the fact if Robinhood
were to go under your
whatever you have there is protected.
So if you have $10,000 worth of stock
and Robinhood goes under,
that $10,000 stock doesn't go away.
That is protected.
You'll be able to get that stock
transferred to another brokerage firm.
So I don't want you to think
or be overly concerned about losing all your money
because you do have the SIPC protection that is there.
That is on every major investment firm that exists.
But once again, you got Robinhood
paying out $65 million in SEC fines.
You got them removing a lot of investment choices
that you see that are pretty standard
on most investment platforms.
So I just have some concern on what is going on.
I would like to see more information from the top people,
the top executives of Robinhood,
because that email and FAQ
they have on their side are lame, they're bogus,
like there needs to be more there.
So those are some of my concerns.
Are you concerned with Robinhood?
Do you have some fear if you have some money with them
that something could happen?
I'm curious to know what you think
what your thoughts are on this.
If you enjoyed this video, if it was helpful
you know what to do,
like, subscribe, all that fun stuff.
This is Jeff Rose reminding you
that it's your money, it's your life,
I know you can make it awesome until next time.
Peace.