October 28, 2021

Robinhood Hits Campus, Where Credit Card Companies Fear to Tread

Caution flags and other guidance could help, and some of Robinhood’s educational materials are pretty good. They reiterate that necessary point that holding onto investments for a long time can earn you piles of compound interest.

Nevertheless, the company doesn’t offer Individual Retirement Accounts, which can help turn small investments into big nest eggs. Roth I.R.A.’s come with tax benefits that are of particular use to college-age, lower-income savers.

In July, Robinhood’s chief executive, Vlad Tenev, said it might add such offerings. A company representative had no additional information to add about any decision or timeline.

Still, there is reason to be skeptical of Robinhood. It recently paid about $70 million in restitution plus a fine — the biggest in the history of the Financial Industry Regulatory Authority — to settle charges of misleading millions of customers and letting others trade investments that were not appropriate for them. And late last year, it paid $65 million to settle Securities and Exchange Commission charges that it had misled users about its use of payment for order flow.

In both cases, the company neither admitted nor denied the charges and findings.

“Investing early is important to building wealth long-term, but research shows that the vast majority of young adults have never invested in the stock market,” the company said in a statement. “We want to help educate and empower all investors, including college students, about investing.”

According to Robinhood’s own survey data, its customers are already more racially diverse than those of more established brokerage firms like Fidelity and Charles Schwab. Kudos for that.

But Robinhood has gotten a lot of mileage out of portraying itself as the champion of newer investors and its boast of “democratizing” finance. It has even panned critics who question whether it has the best interests of beginners at heart.

Article source: https://www.nytimes.com/2021/09/25/your-money/stocks-and-bonds/robinhood-college-tour.html

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