Robinhood Markets, Inc. HOOD said its net cumulative funded accounts at the end of November were 23.3 million, up approximately 20 thousand from October.
Over the last 12 months, net deposits were $16.4 billion, translating to an annual growth rate of 23%, the company said in a release.
Robinhood is witnessing a substantial inflow of wealthier clients from larger brokerages, following the implementation of its 1% match promotion on transferred accounts, per a news report by The Wall Street Journal.
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Since the promotion's start on Oct. 23, Robinhood has seen a significant increase in account transfers.
By Wednesday of this week, the trading platform had garnered approximately $1.1 billion in account transfers, a notable increase from $350 million and $375 million in the second and third quarters, respectively, The Wall Street Journal report added.
These transfers often involve substantial sums, with over 150 accounts exceeding $1 million, predominantly from major brokerages like Charles Schwab Corporation SCHW, Fidelity Investments, and Morgan Stanley's MS E*Trade, the report added.
Comparative Market Position
Despite these gains, Robinhood's assets under custody, totaling $94 billion as of November's end, are still dwarfed by those of its competitors. For context, Charles Schwab alone managed $8.2 trillion in assets, highlighting the disparity in market share.
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The brokerage industry has undergone significant consolidation recently, with acquisitions such as Schwab's purchase of TD Ameritrade and Morgan Stanley's acquisition of E*Trade. Schwab acknowledged some expected client attrition due to these consolidations.
Robinhood's Strategic Response
Steve Quirk, Robinhood's chief brokerage officer, views the current industry disruptions as a prime opportunity for growth.
"There is some disruption happening in the space right now, probably the biggest disruption I've seen in my life," Quirk told The Wall Street Journal. "For us, it's an opportune time."
The company aims to expand beyond its image as a trading app for young, novice investors, introducing features like retirement accounts and 24-hour trading.
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Contrasting with Robinhood's growth, Schwab reported no significant loss of clients to Robinhood, noting that most of its new individual investors are under 40 years old.
Robinhood has diversified its services amidst a decline in trading activity post-pandemic. It has ventured into retirement accounts, credit-card services, and raised yields on customer cash to attract a broader clientele.
While Robinhood has reported more incoming than outgoing transfers since the promotion's start, it remains discreet about the specifics of outgoing transfers. The promotion, initially set to end on Dec. 8, has been extended to Jan.31, with conditions on the 1% match for a two-year account retention.
Price Action: HOOD shares closed lower by 3.56% to $11.66 on Friday. Shares were down 0.52% to $11.60 after hours.
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo: Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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