Final month, Robinhood Markets introduced its entrance into the wealth administration area with its plan to acquire TradePMR, the Florida-based expertise and custodial providers supplier for registered funding advisors with over $40 billion in property below administration throughout 350 corporations.
TradePMR CEO Robb Baldwin and Robinhood Chief Brokerage Officer Steve Quirk mentioned the deal in additional element on the MarketCounsel Summit in Las Vegas. The deal got here collectively as a result of Robinhood had self-directed purchasers who had been asking if the corporate had somebody who may advise them on their investments. TradePMR was searching for a option to attain next-generation buyers, and Robinhood, with a median age of early 30s for its buyer base, had them.
“What we’ve discovered over time is so as to have the ability to have the ability to accommodate all their wants as they develop, begin having youngsters and households, and many others., aspirational targets are, most of them don’t wish to be simply self-directed,” Quirk stated. “Additionally they need the flexibility to have the ability to ask for assist in some portion of their property, or in some circumstances a bigger portion of their property. We actually hadn’t had an answer to offer them after they ask for that.”
Baldwin stated the 2 corporations will create a referral program, giving TradePMR’s RIA purchasers entry to Robinhood clients via a joint tech platform. That referral program shall be totally different from these at present current on the huge custodians.
“A number of RIAs which are massive are massive due to the referral packages, and people referral packages have been diminished over time,” he stated. “We actually really feel prefer it’s time to kick this into excessive gear as a result of right here’s the subsequent era that we’re all attempting to achieve. They’re all right here in a single spot.”
The present referral program mannequin “was constructed with private relationship with thoughts, assembly in a convention room face-to-face, and many others. COVID modified every part about how all of us work already,” Baldwin stated.
They’ll construct a referral program that’s extra progressive than opponents’ and extra digitally targeted, because the next-gen investor operates digitally, he stated.
Quirk, who spent 13 years at TD Ameritrade, stated they hope to duplicate what TD did with its referral program, with advisors clamoring to get in. It’s estimated that $124 trillion in property will switch to the subsequent era.
“The recipients of which are the shoppers of Robinhood,” he stated. “It’s actually highly effective to consider the place this goes over the course of the subsequent decade or two and the way highly effective this could turn into for any advisors which are a part of it.”
The expertise is one other key aspect of the deal, Baldwin stated. Most custodian and brokerage back-office programs are constructed on legacy expertise.
“Once you deep dive into these programs, you notice they’re all on mainframe computer systems; they’re all constructed within the ’70s and ’80s,” he stated.
Many corporations have been cobblestoning issues on high of those legacy platforms to attempt to make them extra environment friendly. “That is what we’ve been doing for many years,” he stated.
In contrast, Robinhood constructed its personal back-office system on Amazon Internet Providers.
“To me that’s an enormous lightbulb as a result of if you’re within the expertise enterprise in any respect, you notice it’s actually robust to do integrations with outdated programs,” Baldwin stated. “It’s actually robust to develop your small business and scale with outdated programs.”
Baldwin believes this shall be a game-changer going ahead, and that shall be a giant differentiator for corporations that aren’t on legacy programs. Only in the near past, we have now began to see extra wealthtech startups creating merchandise inside six months.
“We’re beginning to see a revolution happen once more in our business from a expertise standpoint that I feel, once more, goes to take us to a complete totally different degree,” Baldwin stated. “And if we’re going to have these sorts of applied sciences and work with them effectively, we have now to have nice again workplaces. And so they have it.”
