Robinhood retirement accounts could come as soon as June

Posted: 24 May 2022 1:41 pm
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The company said during an earnings call that it plans to roll out its retirement accounts by mid-2022.

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Online trading app Robinhood is inching closer to offering retirement accounts. Robinhood executives have been providing limited updates during the company’s last two earnings calls, but they’ve said the company plans to roll out the new account options by mid-2022.

Robinhood, who pioneered commission-free trading, is looking to offer more options for long-term investors. The move to bring retirement accounts into the fold will help Robinhood bolster its platform to stay competitive among the growing landscape of discount brokerage services, especially those that offer options beyond individual taxable accounts.

This also comes as both Robinhood’s revenue and monthly active users declined in the first quarter of 2022. The company might be hoping that its push to expand the platform’s functionality by rolling out new products will both strengthen customer retention and attract new customers.

Information is limited, but here’s what we know so far.

Robinhood to launch retirement accounts some time in 2022

Robinhood CEO and cofounder Vlad Tenev said last year in the days ahead of the company’s July 2021 initial public offering (IPO) that it was exploring adding new account types, including retirement accounts.

“We are interested in building more account types, including IRAs and Roth IRAs, we’ve been hearing that a lot from our customers,” Tenev said in response to an investor question, according to Reuters. “We want to make first-time investors into long-term investors.”

Tenev reiterated the company’s commitment to adding new products during a January 2022 earnings call, and gave a tentative launch date of mid-year 2022 for its retirement accounts. He said the company was looking at opportunities to increase average revenue per user (ARPU) and to monetize its accounts by giving users more functionality over time, with retirement accounts being one of those ways.

In March, Bloomberg reported that code had been found in a beta version of the Robinhood app that referenced the upcoming retirement accounts, sparking discussions that a potential launch date was near. Steve Moser, an iOS developer and contributing writer at MacRumors, shared findings with Bloomberg that showed several references to traditional IRA and Roth IRA accounts, as well as pension accounts, in underlying code inside the beta version.

Robinhood’s most recent update came in April during an earnings call with investors. Tenev didn’t go into much detail about the company’s headway on building out these new account types, but said they’ve been “making great progress” and that they’re “excited to roll it out later this year.”

“I think that this is a very, very important need for our customers to get help investing for the long term with the same low cost and user experience customers have grown to love and expect from Robinhood,” Tenev said during the call. “So we’re very excited to deliver that for our customers, and we think you’ll really like it.”

Why would Robinhood want to offer retirement accounts?

According to Tenev, customer demand for retirement accounts has been strong. This is not surprising considering their many benefits. Chiefly, tax-advantaged accounts, particularly IRAs, allow investors to invest in many of the same securities as taxable accounts while also benefiting from tax incentives.

Expanding its account types will give investors a more centralized platform. This could help Robinhood retain current users who favor the platform’s design and user experience but venture elsewhere because of Robinhood’s current limitations. In April, Robinhood reported a loss of monthly active users, which drove a decrease in revenue across its equities, options and cryptocurrencies segments.

It will also position Robinhood to attract new customers and tap into a vast market. Americans held $13.9 trillion in individual retirement accounts (IRAs) at the end of December 2021, up 13% from 2020, according to the Investment Company Institute.

This will allow Robinhood to compete more directly with the “big four” stock brokerages — Charles Schwab, Fidelity Investments, E-Trade and TD Ameritrade — as well as online brokerages such as Interactive Brokers and M1 Finance that already offer retirement accounts as an option.

Now what?

Robinhood provided a tentative launch date of mid-2022, and we’re nearing the end of May. So we might hear news some time over the next month. From what Robinhood executives keep saying, these new account options are a priority for the company. If not, Robinhood should provide another update when it releases its second-quarter financials in August.

We’ll provide an update once we have more information.

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At the time of publication, Matt Miczulski did not own shares of any equity mentioned in this story.

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