Robinhood and its custodian TradePMR are seeking to retain and attract more registered investment advisors by reducing the interest rates it charges for borrowing against investments, offering high-yield cash accounts, and ramping up a new forgivable RIA loan program, executives said at its advisor conference in Washington, D.C., on Wednesday.
As of July 1, TradePMR will reduce the interest rates it charges on the platform for margin and securities-backed lending, Kate Mapstone, head of RIA Strategy at Robinhood Markets, told advisors.
“Since introducing lower retail margin rates in our retail business, in two years the balance has grown more than four times,” Mapstone said. “We want to help advisors capture that same opportunity.”
Robinhood offers tiered margin lending rates ranging from 5.00% to 3.95%, according to its most recent rate schedule. On the sidelines of the conference, Mapstone said the new rates for RIAs would be as low as 4.25%, depending on the bank call rate and size of the balance.
“This has become a serious solution to offset the possibility of having to sell assets for a tax event or purchase,” TradePMR CEO Robb Baldwin said. “There are a lot of people who compete for larger balances for asset-backed loans, and we get that industry-wide that some of the most sophisticated advisors out there are really shopping for good rates, and we want to be competitive.”
Earlier this year, Charles Schwab CEO Rick Wurster said the country’s largest custodian was also leaning further into its lending capabilities for RIAs after seeing 85% growth in originations in its pledged asset line, which allows borrowing against non-retirement assets.
The move is one of several by TradePMR to compete with the larger legacy custodians following its time as part of Robinhood for a little over one year. During the three-day conference, the firm discussed going live with its client referral program for advisors, which will roll out next week to 5,000 clients, according to Baldwin.
Baldwin and Mapstone also told advisors about a relatively new forgivable loan program for RIAs to help fund advisor acquisition and succession-planning ventures. Baldwin said on the sidelines that the firm had already made a few loans and had a strong pipeline of interest for more.
“We’ve introduced this by email already to advisors, but we’re educating them more about it today,” he said. “I spoke with some advisors about it last night, and they were really excited about what they want to do with it to grow their business.”
In addition to the lower rates and loan program, Mapstone also said that TradePMR was offering advisors a high-yield cash savings option to use with clients. The firm sees this as a further differentiator for how advisors can manage client portfolios within their platform.
“We know that fintech companies have offered meaningfully higher rates on cash savings for years, while clients’ cash or traditional brochures continue to earn next to nothing,” she said. “This is an area ripe for disruption as we continue to build our capabilities for advisors.”
The push toward RIAs, while seeking to bolster TradePMR, aligns with Robinhood’s history of competing with larger players in low- or zero-cost retail investing and brokerage to attract customers.
“The more of a relationship that we have [with advisors], the easier it becomes for us to deliver economic benefits to them, because it’s easier to find ways so that we can monetize it and then deliver more back to them, and then their customers can benefit,” Steve Quirk, chief brokerage officer of Robinhood Markets, said on the sidelines of the conference.
Quirk also positioned Robinhood and TradePMR against competitors such as Schwab and Fidelity Investments by not offering proprietary products or competing against advisors, while acknowledging that the firm offers a concierge service for self-serve clients seeking help.
On a later panel, Pat Dunn, the firm’s senior director of concierge services, said his team would generally refer clients to a third-party advisor if their needs became more complex.
“As the complexity ratchets up, that is the space I would look for advisors and that specialization,” he said. “Who has SpaceX RSUs (restricted stock units) that they need help being managed out of? Who has crazy tax-loss harvesting stuff they need to accomplish? There are always going to be things that take a lot of care and time, and that is not a place that we are going to scale into.”
Robinhood and TradePMR said earlier this week they had re-upped their contract with Wells Fargo for custody and clearing solutions through 2032, giving advisors a choice between remaining with that bank or moving to Robinhood.
But Baldwin said on the sidelines that once Robinhood has built out a fuller wealth custodial platform for advisors, there will be high demand for what he characterized as a more tech-forward offering and the first among competitors not “built on a mainframe computer.”
“It’s amazing what Robinhood has been able to create [on the retail side], but now we are building out the wealth side, and it’s going to take a little more time,” he said. “We’ll iterate until that’s complete . … When that becomes available, I think we’ll have a lot of advisors who are going to want to be there, and I think we have more advisors who want to be there than not.”
