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SIPC Says It Has Serious Concerns About Robinhood's New Product

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Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#291

Post by ineedasername »

rootusrootus wrote: post #268
jfim wrote: post #23

Earlier quoted context omitted.

Probably because someone took "ask for forgiveness, not permission" a bit too far.

Or the president of SIPC is not speaking authoritatively for the organization and doesn't realize the RH lawyers have already been talking with SIPC about this. Of course, maybe that didn't happen, but between the idea that RH would build and announce a new product without running past the proper regulatory authorities, and the idea that the president of SIPC might just be wrong ... well, the latter seems more plausi…

"It's plausible" is not the answer anyone wants to hear to the question "Is my money safe?"

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#292

Post by ineedasername »

bduerst wrote: post #229
yawz wrote: post #153

Earlier quoted context omitted.

This works in certain industries (e.g. Uber), but not in others, especially heavily regulated ones.

Didn't Uber's self-driving car hit and kill a jaywalker?

In Uber's defense, killing someone is pretty much always an "beg forgiveness" rather than "ask permission" situation

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#293

Post by ineedasername »

vasilipupkin wrote: post #171
DevX101 wrote: post #11

> “I disagree with the statement that these funds are protected by SIPC,” Stephen Harbeck, president and chief executive officer of SIPC How the hell did this product get launched?

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…

I think there's a lot the SIPC president can do if they believe a product doesn't fall under their jurisdiction. Specifically, he can decide SIPC won't act when the firm goes belly up. Disagree with that interpretation? Well the firm doesn't exist any more, they can't fight it. Feel free to mount your own legal offensive against SIPC. If you can get to your money.

But that aside, here's the point you're missing: Robinhood is marketing this as a product that can be used independently of brokerage purposes. SIPC covers brokerage firms and, yes, cash in such accounts. But the SIPC president is arguing that it's not a brokerage account if it's marketed as an independent product for people with no intention of using it as such.

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#294

Post by vec »

anthuswilliams wrote: post #285
vec wrote: post #265

Earlier quoted context omitted.

If you understand what you're signing up for and still want to dabble in stock trading for fun then sure. Go wild. Everyone needs a hobby. But the homepage of robinhood.com has the following call to action above the fold: > Investing, Checking & Savings. All for Free. > Robinhood gives you the tools you need to grow your savings, invest in your future, and do more with your money. Does that sound like "this is not an…

What should their ad copy say instead? "Robinhood gives you the tools to lose all of your money making impulsive decisions" ? All brokerage accounts advertise themselves as investments, even if the reality is that idiots open them and lose all of their money trading options. I mean, if you really have this expectation of marketing copy, I don't blame you, that's a totally legitimate position to hold. It's just not on…

The grandparent talked about treating it like fantasy sports, and if they advertised themselves like, say, Draft Kings does then it would be one thing. As it is, though, the more thoroughly you trust their representation of how their product should be used the worse off you will be. I usually take that particular trait as a big red flag that a the universe would be better off without the company in question.

And yes, this criticism does apply to most brokerage accounts. Most brokerage accounts don't have half of Silicon Valley fawning over them, though.

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#295

Post by ineedasername »

warp_factor wrote: post #160

Robinhood 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…

In their defense, their version of "go fast and break things" won't kill any jaywalkers, and instead could be devastating on a far wider scale, if 2007-2008 collapse showed us anything. (upwards of 10,000 extra suicides there [0] so....)

[0] https://www.forbes.com/sites/melaniehaiken/2014/06/12/more-t...

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#296

Post by guelo »

jartelt wrote: post #66
kinkrtyavimoodh wrote: post #38

Earlier quoted context omitted.

> bad idea about personal finance Such as?

The vast majority of people should just be maxing out their 401k and investing in index funds. They shouldn't be using Robinhood to buy individual stocks, buy cryptocurrency, or do options trading.

No, you have to explain why robinhood is worse than etrade. You can buy the same index funds or individual stocks with either brokerage.

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#297

Post by guelo »

vec wrote: post #259
wuliwong wrote: post #122

Earlier quoted context omitted.

I don't know. It seems like mental gymnastics to say that zero fees hurts someone without a lot of money. It sounds more like you believe that people with access to limited capital can't understand the markets as well as people with access to large amounts of capital. If you didn't believe that I think you would conclude lowering the fees for trading opens up the possibility for less wealthy people to participate in…

I do believe that people with limited access to capital can't understand the markets as well as institutional investors, and you should too. It's not about intelligence, it's about access. The rich have more current information about state of the market than you do and can act on that information sooner than you are able to, which allows them to systematically make slightly better trades than you can. Stock trades ar…

This is elitist bullshit. I don't have a huge amount of money save but I use about a dozen index funds to stay well diversified, stocks, bonds, international, domestic. And I periodically rebalance my portfolio to stay within my diversification targets. I appreciate not paying a couple hundred dollars a year for my trades.

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#298

Post by fooker »

axiak wrote: post #137
binarymax wrote: post #65

Earlier quoted context omitted.

I remember (but cannot find a citation) in ~2005/6 AIG was offering 4% saving accounts. I'm having deja vu all over again.

That's extremely reasonable for a savings account. The fed rate at the time was around 5% [1]. Today's is much lower which raises questions about where this rate is coming from. 1: https://en.wikipedia.org/wiki/Federal_funds_rate#Historical_...

Long term bonds are just above 3% now.

Re: SIPC Says It Has Serious Concerns About Robinhood's New Product

#299

Post by te0x »

jkqwzsoo wrote: post #218
jldugger wrote: post #133

Earlier quoted context omitted.

I just use Robinhood to buy ETFs for SP500 and AGG without trading fees. I don't have that much left over after maxing out all my tax advantaged options, so trade fees aren't insignificant. But people like me should recognize that the people using Robinhood to trade individual stocks, buy cryptocurrency, trade options or trade on margin are effectively subsidizing those who do. Along with the participants of Robinhoo…

But you could buy those same ETFs with the same $0 fee on Vanguard (or Fidelity and a couple other platforms now), a substantially more established financial firm, and you could keep your residual cash in well established money market funds like VMMXX, also with $0 fee, or VMSXX for tax-exempt growth. The only real reason to have money in RH, IMO, is if you're gambling with <$1000 on penny stocks and options-cum-lott…

I buy Vanguard ETFs and many other index funds (that Vanguard doesn't offer) on Robinhood. The user interface is 100x better, and why wouldn't I want to keep it all in 1 place? They just need an IRA product and most people would be set.
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