I have had such an account at Fidelity for years.
However they only pay lower money market rates which are based on bonds less than 30 days.
SIPC Says It Has Serious Concerns About Robinhood's New Product
191–200 of 322 posts
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#192Earlier quoted context omitted.
I'm not sure what you mean by "way over" but 6-month t-bills are paying 2.5% right now. It's probably a loss leader but since they'll make money from merchant fees on debit cards, it might not be that much of a loss.
I doubt they'd be able to 100% buy tbills at that maturity length (hence curiosity on what they're doing on the backend here), but even assuming 2.30~ average plus whatever Mastercard kickback is negative 50-70bp is still a hell of a margin to make on selling consumers tbills and not raising funds for your own investment activity edit: a better way to explain it - we'll give you tbills at 3% p.a and let you pull out/…
My guess is: they're investing in 6-month T-Bills, they're expecting rates to rise over the next 6 months to 1 year, they're covering the remainder out of pocket, and by doing this they're capturing the lion's share of their target market before their competitors do.
In addition, I'm guessing their AUM are low relative to their popularity. Lots of millennials may be very vocal about Robinhood, but may not have the quietly massive asset balance that boomers have, tucked away in Schwab, Fidelity, or Vanguard. This could be a land grab for AUM to support future VC rounds, an acquisition, or an IPO.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#193Robinhood strikes me as a complete financial amateur-ish company, trying to attract millennials that don't know better by branding themselves as a cool tech company. I have been using Ameritrade for a while and was curious about their no fee platform so gave it a quick go. The graphs have no legends associated in the app. The spreads seems not up-to-date with official quotes, etc. I went back to Ameritrade as fast as…
I have been using Robinhood for years, but I don't disagree at all with this statement.
I have always been a little bit suspicious of their approaches.
For me the strangest thing about their business is their zero-fee approach. Yes you can make money by getting interest from uninvested funds + premium subscriptions + trade arbitrage, but if it's such a good business why aren't the incumbents taking similar approaches?
Contrarians would say that incumbents are just to engrained in their past approaches to actually adopt modern strategies, but I had that extremely hard to believe, especially when one of the incumbents, E-Trade, was the pioneer of online trading.
Also, unlike other industries, financial firms are savage. They're not scared to make risky bets and spin-off new businesses and strategies. Their industry is naturally risky, so they have the experience and tenure to make risky bets, without souring stakeholders.
I always give Robinhood the benefit of the doubt, because in my day to day I personally can say that it works great. They definitely nailed the Customer Experience. However that doesn't mean that they have an actual viable long-term business, so I prefer to stay reasonably cautious... Time will tell.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#194Earlier quoted context omitted.
there is little he can do, as cash in brokerage account is obviously protected by SIPC. Downvoters: you are confused. When you move cash to a brokerage account, it's protected by SIPC. It's a loophole, because this protection was not intended to be for permanent cash parking in an account - but there is nothing that can stop that protection from taking effect. SIPC statute is clear, cash in account is protected. You…
You don't seem to have read the article: "“The statute that we administer says that we protect money with a brokerage firm that is used for the purchase of securities,” he added. “On Robinhood’s help page, it says that you don’t need to invest to use Robinhood checking and savings, that statement is wrong. If you deposit money for any other purpose, it is not protected.” If they disagree it's a brokerage account, and…
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Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#195Matt Levine comments on this today: https://www.bloomberg.com/opinion/articles/2018-12-14/nyse-n... "There is a lot of confusion about what Robinhood’s thing is. Delightfully, it is called “Robinhood Checking & Savings,” apparently because calling it a “checking account” or a “savings account” would come too close to implying that it is a real bank account insured by the Federal Deposit Insurance Corp., while “checki…
That's great. It's like the "chicken wyngz" you can buy at the grocery store that are probably chicken but can't legally be called wings.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#196It's a bit jaw dropping that they've launched this without talking to the SIPC to check that they agree with the statement that they provide FDIC-like protection on these accounts. I wonder what happened here…
They almost have the UI changes to the phone app done, which is the hard part. What's a little paperwork?
This made me laugh out loud. "We just shipped the new tab bar item!"
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#197It's a bit jaw dropping that they've launched this without talking to the SIPC to check that they agree with the statement that they provide FDIC-like protection on these accounts. I wonder what happened here…
AFAIK they haven't yet launched, it's not going to be until "early 2019". Not a defense of Robinhood, but their lack of (apparent) SIPC protections today do not necessarily imply they will be missing when they formally launch with actual customer deposits.
So it’s securities fraud?
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#198Earlier quoted context omitted.
Just because the company financial news is about has an app doesn't make it "tech". And here they're reporting direct, attributed statements, so it should be easy for you to explain what they "didn't understand".
One of my pet peeves is that certain internet based companies are reported as "tech" and others aren't. What's "tech" about Uber or AirBnb?
I think it is more appropriate to call them a software company. They both make software that facilitates real-world interactions.
I consider software companies to be "tech" companies, but alas.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#199HN's value has really declined with the appearance of all the paywalls the last couple of years where there's no simple workaround. I've stopped clicking on WSJ, NYT, Bloomberg articles. Would be nice to just be able to filter them out of the view.
I've been using Outline.com when possible to get around this, but I agree. Posts behind paywalls should be removed, or tagged and filterable.
Re: SIPC Says It Has Serious Concerns About Robinhood's New Product
#200Through all of this I can't help but be reminded of the 2008 financial crisis and think "this is not going to end well." One part of that crisis was Icelandic Banks making a huge push for savings all over the UK and other parts of Europe ("IceSave") with the promise of better interest rates. When it all went belly up those savers realized these Icelandic banks were not quite the same thing as UK banks and Iceland ref…
> Iceland refused to make depositors whole As I recall it, the 340,000 people of Iceland had no chance in hell of covering the enormous amounts even if they wanted to.
That’s what I thought was funny. How did Iceland’s financial laws allow a local bank to take deposits so big the entire country can’t insure it. Not to mention the criminal element.