Update – May 12, 2015
It has been nearly one month since I originally signed up for a Robinhood account and posted my original impressions via this blog article. Unfortunately since that time my experience with Robinhood has degraded and as a result, my enthusiasm for this new trading platform has declined as well. My difficulties with Robinhood are in two main areas – the assessment of fees and the inability to contact a specific person within their company.
After writing this article I had been assessed a $30 fee as Robinhood was unable to withdrawal funds from a bank account I was using to test Robinhood. It is worth noting that this fee was not assessed until a few days after they had originally showed the transaction as approved (which was in and of itself a three day period). Since that point I had purchased stock with the original funds, only to one day be surprised with a negative cash balance.
First I had contacted Robinhood via e-mail to discover the reason behind the fee and they informed me that they were unable to access the funds within my bank account. I had contacted the funding institution that held my bank account and their customer service, they assured me that funds could be accessed from this account and in any case Robinhood should have no issue if they were to try again. I had contacted Robinhood again and inquired into reversing the fee, but Robinhood notified me that they were unable to do so based on policies stated within their terms and conditions. Not ideal, but fine I guess. At this point I just considered it a cost of doing business.
I next attempted to make another transfer – but first doubled checked the amount within the bank account and confirmed with the source company that the transfer would be accepted. All set, or so I thought. I hit transfer and the request immediately declined. Ugh. I contacted Robinhood customer service as I was now positive this issue was not on my end as I have used this particular bank account for many other transactions with many other companies in the past. After two days I received a response instructing me to re-establish a link between accounts and verify that my account was eligible for ACH transfers. I next requested clarification and specifically to address the fee. It was once again stated that the problem was on my end.
By this point I really did not feel like debating the fee or waiting another three days minimum to establish a link between my Robinhood and bank account. Besides, would they assess me yet another fee if the transfer failed?
Beyond fees and difficulty with fund transfer it is worth noting another unsettling aspect with Robinhood, specifically the inability to contact an actual person within the company. I was unable to locate a phone number on their website or via a Google search. In addition, all Robinhood e-mails are closed with “The Robinhood Team.” In my case correspondence by e-mail with Robinhood generally took two to three days with the one exception being when they notified me of why I was assessed a fee. This does not give me confidence in a company who a customer may entrust with their money.
At this point I have given up on Robinhood and opened a trading account with Fidelity. It’s worth noting that I was able to open a Fidelity account within one day and have not been assessed any fees. I am also able to speak with a real person as needed.
Upon reflecting upon my experience with Robinhood my takeaway is that at this point the Robinhood brokerage account is something that works better in theory than in practice. Zero trading fees appear to be an illusion, as the fees will be assessed somewhere and in my perception, funds do not feel as safe as with a traditional institution such as Fidelity. Sure Fidelity charges a $7.95 fee per trade – but my experience thus far has been excellent and completely uninterrupted.
Original Article – 04.19.15
Another way that technology is improving our lives is through increased access to stock trading. With the Robinhood iOS app it is now possible to trade stocks with zero commission cost.
Historically, for many, commission costs were a gate to profitably trading on the stock market. At one point in history stock trades had cost $100 for each trade – one $100 charge for buying and another $100 charge for selling. The round trip costs of buying and selling stock made it cost prohibitive for anyone except high volume traders to profitably trade. More recently commission prices dropped to about $10 for each trade and sometimes brokerage houses provided a fixed number of free trades. Although the reduction in commission costs made stock trading available to a wider swath of the population, one still needed to consider the commission costs while trading stocks.
Robinhood changes everything. With Robinhood an individual can buy and sell stock with zero commission. Concerning trading profitably, an individual needs to simply consider share price and need not worry about the accumulation of trading fees.
I have used Robinhood for about a week now and have found the experience to be fairly simple and straightforward. The user interface is easy and elegant and placing a trade is simple.
When creating an account, the individual trader will need to provide tax related information and submit themselves for a credit check. Furthermore, a bank account will need to be linked to the Robinhood account in order to fund the account. Again, the process was straightforward and I completed each step solely on my iPad within minutes. Robinhood also does not require a minimum funding amount to open an account and begin trading.
Robinhood is still a fairly new product and was just recently made available to the public. As a result they are working to further refine the overall user experience. For example, when funding an account it takes three days to complete a transfer. The process itself is really easy and may be initiated in under a minute, but the actual electronic transfer from bank to Robinhood takes three days. I contacted Robinhood customer service and they informed me that they are working on reducing the fund transfer process.
In terms of selection of tradable stocks, I have found most of what I was seeking. Every now and then there is stock that can be monitored but not purchased. For example, there is a stock that I have been monitoring called Great Panther Silver Limited (GPL). GPL may be monitored on Robinhood but may not be purchased. A reason is not provided, simply the absence of the “Buy” button. According to the Robinhood FAQ the inability to purchase GPL may be the result of it being a foreign stock. Even though it is traded on the NYSE it may be subject to additional fees. I suspect over time as Robinhood gains traction and user feedback that a wider range of securities will become available. Regardless there is a wide range available for trade.
Overall Robinhood has greatly increased the accessibility of stock trading to the masses while greatly reducing costs. At no other time in history has the stock market been as accessible to so many for so little. Applications such as Robinhood are really transforming the world and in time will greatly disrupt existing business models by traditional brokerage firms.
Image Credit: Robinhood