Keegan said:
Sam said:
You also have to hold the funds for years or they’ll claw back the bonus.
How many years?
2-5 years, depending on the bonus amount.
That might be longer than Robinhood lasts, for all we know.
@Keelan
Exactly. They probably won’t be around that long.
@Keelan
People have been saying that for years, though.
Sam said:
You also have to hold the funds for years or they’ll claw back the bonus.
They’re betting most people won’t max it out. Plus, they’re making a lot on trading fees. It’s a long-term strategy to lock in customers.
I saw an interview with Robinhood’s CEO when they first rolled out the unlimited 3% bonus. He mentioned they make about 2% of AUC (assets under custody) as revenue, which makes the 0.6% annual bonus pretty sustainable.
Investors also pay through worse execution or delayed dividend payments compared to other brokers. I’m paying less than 0.10% extra per year in fees, so I’ll be ahead by over 2.5% by 2029.
@Sterling
How on earth are they making 2% of AUC?
Kingsley said:
@Sterling
How on earth are they making 2% of AUC?
Some possible reasons:
- Large spreads on options
- No interest paid on cash balances in IRAs
- They keep 85% of securities lending revenue if you opt in
- Encouraging active trading
I chose not to sign up for securities lending since lent shares might not be covered by SIPC.
@Sterling
Who holds cash in an IRA anymore? Any cash I have goes into something like SGOV or USFR.
@Sterling
[deleted]
Nicole said:
@Sterling
[deleted]
They don’t take your dividends when your shares are lent out. Every brokerage gives you a payment in lieu of a dividend.
Nicole said:
@Sterling
[deleted]
What are you even talking about?
Nicole said:
@Sterling
[deleted]
Robinhood’s ‘match’ is just a bonus on rollovers, not a real match like employers do. They’re not misusing the term, and their explanation is pretty clear.
Nicole said:
@Sterling
[deleted]
Exactly. It’s a 3% match on what you roll over, not on contributions like employers do. They’re not trying to trick anyone here.
Wait, so I can make an easy 3% just by moving my old Roth IRA to Robinhood?
Morgan said:
Wait, so I can make an easy 3% just by moving my old Roth IRA to Robinhood?
Yup, as long as you sign up for Robinhood Gold and hold it for five years.
Morgan said:
Wait, so I can make an easy 3% just by moving my old Roth IRA to Robinhood?
Yeah, but do you really want to keep it there for five years? Especially with Robinhood?
Morgan said:
Wait, so I can make an easy 3% just by moving my old Roth IRA to Robinhood?
Yeah, but do you really want to keep it there for five years? Especially with Robinhood?
What’s the worst that could happen if it just sits there?
@Han
Nothing really. Robinhood’s issues have mostly impacted day traders. For holding an IRA, it’s actually a pretty good option since no one else is offering a deal like this.
Vere said:
@Han
Most of the complaints about Robinhood are from when they paused trades during the meme stock frenzy. That’s only a problem for a small group of people.
They’ve also got higher hidden costs for options trading, according to the Wall Street Journal.
@Zephyr
That’s for options, though. It probably affects only 2% of their users.