Robinhood Financial is ramping up its financial adviser recruiting activity, entering the top 20 firms among incumbents by snatching up 40 experienced and licensed advisers from competing firms year to date, according to InvestmentNews‘ Advisers on the Move data.
The majority of Robinhood’s adviser recruits this year came from Fidelity Brokerage Services (35%) and TD Ameritrade Inc. (25%), according to the data. A handful of advisers were recruited from other wirehouses and brokerages, including Charles Schwab & Co., Merrill Lynch, Pierce, Fenner & Smith Inc., Vanguard Marketing Corp. and Morgan Stanley, among others.
Robinhood’s recruitment activity during the first four months of this year is a stark contrast compared with prior years. The online free trading app recruited 52 advisers for the full year 2020 and only eight advisers total during 2019. The startup is now ranked as No. 17 in the top 20, edging out Commonwealth Financial Network, Rockefeller Financial, and Purshe Kaplan Sterling Investments.
Robinhood plans to double the number of full-time registered reps throughout 2021, said a company spokesperson. Robinhood has lured a total of 100 advisers from other firms since 2019.
“This year, Robinhood has seen a significant increase in interest and activity on our platform and we want to support all of our customers through this rapid growth,” the spokesperson said. “Robinhood is bringing on skilled and trained registered financial representatives to deliver efficient response times and meet our customers’ needs.”
To be clear, Robinhood is not an investment adviser and does not offer financial advice, the spokesperson said. These adviser recruits will not be used to provide financial advice, rather, customer service.
“We are increasing our FINRA-registered financial professional headcount to support our customers with their brokerage-account-related issues,” the spokesperson said.
More than 10 million new brokerage accounts opened in 2020 as interest by mainstream investors skyrocketed during the pandemic and Robinhood claimed 27% of all new do-it-yourself account openings, more than any other firm in J.D. Power’s 2021 U.S. Self-Directed Investor Satisfaction study.
Robinhood’s user count currently clocks in at 13 million.
These advisers’ roles, with job titles ranging from customer experience reps to options support specialists, include phone support through a new in-app contact feature where customers can request to speak with a registered financial representative by phone for issues related to options trading, account security and to customers needing assistance with transfers, such as withdrawing money, and issues with selling.
Robinhood opened new offices in Tempe, Arizona, Southlake, Texas, and Denver to create additional centers for customer support, and continued to grow its customer support team in Lake Mary, Florida and Charlotte, North Carolina.
“The expansion of our customer support teams is being developed in tandem with our continued investment in expanding informational and educational resources to help customers learn more about the markets and investing and make more informed decisions,” the spokesperson said.
Robinhood’s increase in new hires is likely one in a series of moves to grow its business, repair the damage to its reputation, and appease regulators ahead of its initial public offering, said Jeremy Belfiore, CEO of Trusted Visions Placement & Consulting. Robinhood also has plans to build a platform to allow users to buy into IPOs, including its own.
“Robinhood is doing everything they can to get more, I wouldn’t say regulated, but have more policies, procedures and infrastructure in place to prohibit things like the GameStop frenzy,” Belfiore said.
While its market share has grown, its strength in digital channels and value for fees was offset by poor performance on trust, people and problem resolution, according to J.D. Power. Robinhood found itself at the center of the GameStop stock surge in January and February this year, resulting in outrage and skepticism from customers and even U.S. political leaders.
Robinhood is likely leveraging its recent capital infusion to add significant numbers of new hires across functional areas that should help the firm improve its product, customer education and image, said Sophie Schmitt, senior analyst with Aite Group.
“The addition of a human-driven customer service channel coupled with the technology to scale that service will help the firm become more proactive with customer education and disclosures, especially prior to options investing,” she said.
As for the type of advisers that are being pulled into Robinhood’s customer service centers, they are likely the advisers that struggle making it on their own at larger well-established brokerages where fees and commission are how an adviser makes money, said Jonathan Henschen, president of Henschen & Associates. “Advisers that would be interested in Robinhood are the ones that want to get a steady salary.”
Danny Sarch, founder and owner of Leitner Sarch Consultants, a wealth management recruiting firm, concurred, saying that no adviser with an established book of business would move to work at Robinhood.
“It’s fair that Robinhood needs people who are licensed in order to answer the questions to start working their [call center] business,” Sarch said. “But that’s not the same thing as when Morgan Stanley recruits a UBS adviser — it’s two totally different types. These are just people who are licensed looking for a decent salary job with a new name.”
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