Behind Robinhood’s Retirement Push

Online brokerage Robinhood’s head of investment management left a 21-year career at J.P. Morgan to reach a wider population of American investors. She’s getting the chance with an IRA aimed at the gig economy.

Robinhood Financial became the poster child for the democratization of retail investing during the pandemic, with housebound traders able to buy and sell stocks on their phones.

This year, the trend toward retail investing has been tapering amid market volatility, inflation and recession fears. In the third quarter of 2022, 31% of U.S. retail investors said they reduced the amount of money going to investments, according to a survey by online brokerage eToro.

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Robinhood has also seen a drop in monthly active users through November, falling by 1.8 million users to 12.2 million, and well below its year-on-year Q3 base of 18.9 million, according to the company. During a Q3 earnings call, the company also announced a new investment market: retirement savings.

On that earnings call, CEO Vlad Tenev, also a co-founder, said Robinhood’s five-year plan includes customers using the platform for all of their spending and saving needs, including the investing they offer now, “but also long-term retirement and passive,” he said. “We want Robinhood to be the highest value and best user experience tool for you to manage all of your money.”

The Menlo Park, California-based firm is entering a crowded world of startups, with online 401(k) small plan providers, lifetime income outsourcers and providers highlighting alternative investment options such as cryptocurrency. But the company made a splash in a December 6 blog post announcing a wait list for what it dubbed, “the only IRA with a match,” with availability starting in January.

PLANADVISER spoke with Stephanie Guild, Robinhood’s senior director of investment strategy, to discuss what prompted the brokerage to enter the retirement space and its goals for the future.

PLANADVISER: You had a long and successful career with J.P. Morgan before coming to Robinhood. What prompted you to make the move?

Guild: I joined Robinhood a little over a year ago after 21 years at J.P. Morgan, where I was on the asset management side of the business in U.S. Equities and then moved over to the private bank working primarily in private banking with ultra-high-net-worth individuals. One of the reasons I made the move was because I really did see the contrast of the access to investing for a subset of our population, and wanted to bring my skills to that different set of people.

The median age of our customers is 32, meaning many of them are very early in their retirement journey. Robinhood created access [to the markets] to democratize finance. But just simply creating access is not the only thing we want to do. We want to bring solutions to some of the problems we see … that includes only about 43% of part-time employees having access to a 401(k).

PLANADVISER: Retirement saving is a long-term game that by most measures isn’t considered as interesting or exciting as retail investing. What made Robinhood get into this sleepier part of the industry?

Guild: We kind of always knew that we would be getting into retirement savings, and were focused on how to take it to customers. We really started to get into implementation last year. Everyone was saying that inflation was transitory, but the longer it went on the less transitory it seemed, and we really needed a way to get customers to think about long-term saving.

Also, we saw from the Bureau of Labor Statistics and other sources that the part-time and gig economy that started during the pandemic had really taken hold. There are surveys showing that the gig economy will grow by 17% next year, meaning there will be more people doing independent, flexible work who do not have access to a 401(k) workplace plan. This seemed like the moment to provide our offering.

PLANADVISER: Robinhood’s 1% match may not be a lot for an individual saver, but it would certainly add up if you have a lot of takers. Why did the company decide this outlay was worth it?

Guild: We know from the research that if a company implements a match they get a lot more participation—though if they increase a match you don’t necessarily see a huge jump. Having a match was a way to build an incentive for people to pay attention and see the benefit, along with no minimum fee, no commissions, a huge array of ETFs and stocks … of a 1% match for every dollar they put in. For many of these investors, they may not have had a company match or even know what it means. That’s why education is such a big part of this, letting people know the benefits of a match, to tax advantages, to compound interest.

How we are making this a business for ourselves is not much different than we do in our non-qualified accounts. We took the long view and are in these relationships for the long term. We think both sides will benefit over a long period.

PLANADVISER: Are you considering working with retirement advisers on offering your IRA? What about small businesses who don’t yet offer plans?

Guild: For now, we’re fully focused on the individual and those that don’t have access. We’re looking to serve the people who have  multiple part-time jobs without any benefits or retirement plan, which is not the area advisers are usually focused.

In terms of small businesses, there have been regulatory retirement mandates in different states, and we’re always open to expanding our impact on the everyday individual investor. But for now we are focused on the individual retirement saver.

PLANADVISER: Robinhood was known for giving people leeway to invest how they’d like, but the site also provides recommendations and educational tools. It’s early days, but what has been the initial response to self-selection versus recommended advice in the IRA product?

Guild: [Beyond the company match] the other aspect to our retirement product we built, and my team was responsible for, was a menu of retirement options, including TDFs, that seemed right for the investor. While you can invest on our own, we wanted to give people retirement recommendations if you answer a series of questions about goals, risk tolerance, timing of your retirement, and those types of questions. We then recommend a portfolio that is diversified and based on where you came out in your risk profile calculation. There’s no fee for this, and we had a pretty detailed due diligence for each of the asset classes for the portfolios … The average weighted fees within the funds is never more than four to five basis points.  So far, we have seen good take-up of the recommendation service and expect that to continue.

My advice is that people save as much as they can … if you are maxing out your 401(k) income you can still give to an IRA, either a Roth or regular IRA, to have additional savings for the long-term. But if you don’t have a 401(k), you may be missing out on the tax benefits of a retirement plan altogether, which is something that has always seemed very unfair to me … We hope this offering with the match will motivate people to change that. As much as people can rely on themselves and not assume that a safety net will be there, they’ll be better off in the future.

SECURE 2.0 Passes Senate as Industry Overwhelmingly Hopes for House Passage

The bill, which is awaiting House vote, contains the most popular provisions while also giving time for actors to come into compliance.


SECURE 2.0 passed Senate approval as expected on Thursday, with the retirement industry waiting for House approval Thursday night or Friday.

The reaction to the roughly 100 pages of SECURE 2.0 within the larger omnibus bill has been unanimously positive so far among industry actors and experts interviewed by PLANADVISER. If the bill passes Congress, it will take a signature from President Joe Biden to kick off long-anticipated retirement reforms intended to increase the pool of Americans participating in tax-deferred savings programs. Some of the provisions will go into effect on January 1, with others starting over the next few years and others kicking in as far out as 2033.

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Reactions from retirement advisers, asset managers, recordkeepers and lifetime income shops have been overwhelmingly supportive of SECURE 2.0 this week. Experts anticipate immediate benefits to the industry, such as broadening eligibility for part-time workers, and longer-term potential, including employers being able to match student loan payments with plan contributions in 2024.

SECURE 2.0’s inclusion in the omnibus package that needs to pass this week represented a “good day for folks who are planning for retirement,” though there is “more work to be done,” Josh Caron, the vice president of federal affairs at Finseca, told PLANADVISER. Caron complimented the process by which SECURE 2.0 came together, saying that there were no surprises in the final version, and the conversations and decisions by policymakers were open and transparent. He also praised the provisions on savings credits, catch-up contributions, changes to required minimum distributions and the smoother path proposed to invest in Qualified Longevity Annuity Contracts to bolster retirement income.

Dave Stinnett, head of strategic retirement consulting at Vanguard, also expressed support for the bill and his hopes that it will pass. He notes that Congress was sensitive to setting effective dates that will give the industry the time it needs to make the necessary changes to its policies and practices to remain in compliance.

Stinnett says plan sponsors may get overwhelmed by the many provisions and should focus on the provisions that are both required by law and have effective dates of January 1, 2024, or earlier, which include: increasing the RMD age to 73; catch-up contributions being made to a Roth source; higher catch-up limits for those aged 60-63; and broadened eligibility for part-time workers. Stinnett says these requirements should not be excessively tedious, but they will take planning on the part of sponsors.

Stinnett also enthusiastically supports automatic enrollment and escalation features in SECURE 2.0, which only would be required for new plans. He explains that “automatic plan design works,” and that this provision will also “signal that consensus among industry and policy makers.” He says existing plans will be more likely to adopt automatic features because of this signaling from federal policymakers.

The praise continued with Melissa Elbert, a partner at Aon. She says that, “overall, as a package, they included some provisions that are going to help employers thinking more about supporting financially vulnerable populations.” She noted that some of the provisions, such as widened eligibility for part-time workers and the student loan matching provision, will be especially helpful for women, since they are more likely to work part-time and hold more student debt than men.

Thasunda Brown Duckett, the president and CEO of the Teacher’s Insurance and Annuity Association of America, touted reforms to guaranteed lifetime income. She says, “The legislation continues to recognize the critical role that guaranteed lifetime income solutions play in retirement. Other key provisions can enable lower-income workers to save more; bring retirement savings plans to more workers, including part-time workers and those at small businesses and non-profit organizations; help younger workers start to save through student loan matching provisions; and enable greater savings and flexibility for those nearing retirement.”

Not All Provisions Were Created Equal

Jon Chambers, a managing director at SageView Advisory Group, is bullish on the bill for the industry, but notes that some provisions may be more successful than others, depending on industry demand and uptake.

“There’s plenty of examples of legislation actions that have unintended consequences or just get ignored,” Chambers says, noting the example of in-retirement plan annuities to provide income in retirement. “We’ve seen a number of regulatory moves, but have seen very little plan sponsor uptake on that overall.”

Chambers says an example of policy that may not take off is the emergency savings option. As an untested addition to a 401(k) plan, it’s hard to say yet if people will leverage it at the levels policymakers may expect.

Chambers says an example of policy that may not take off is the emergency savings option. As an untested addition to a 401(k) plan, he finds it hard to say yet if people will leverage it at the levels policymakers may expect.

On the other hand, Chambers says plan sponsor clients frequently ask about the student loan match program as a way to potentially recruit and retain talent.

“The student loan program is something we see a lot of demand for, and that is something that could take off quickly,” Chambers says.

Mike Row, the chief revenue officer at ProNvest, says that while there is concern for the longevity of Social Security, there is a “need for income, whether that is Social Security or retirement plans,” and retirement needs to be seen as an “all-in-one” approach. He also says employers may need help navigating some of the new rules, especially those mandating automatic enrollment and escalation for new plans.

Kirsten Hunter Peterson, the vice president of thought leadership at Fidelity, says, “Fidelity supports SECURE 2.0. We are pleased Congress has prioritized this important and bipartisan legislation. We believe it will enhance the retirement system.”

Hunter Peterson explains that SECURE 2.0 will assist various retirement plans, including 403(b)s, 401(k)s, IRAs, and defined benefit plans.

Fidelity is also prepared to administer a student loan matching provision, Hunter Peterson says. This change will not be effective until January 1, 2024, so sponsors have time to figure out the provision before enacting it, if they choose to. Hunter Peterson praises this policy because student debt is both a financial and emotional burden on workers that limits their ability to buy a home and start a family.

She also supports the provision that allows participants to self-certify that they meet the eligibility for a hardship withdrawal, which would make hardship withdrawals easier and less time consuming for participants.

Paul Richman, the chief government and political affairs officer at the Insured Retirement Institute, said in an emailed statement that, “We expect that the legislation will add billions to the retirement savings for small business workers, part-time workers, employees with student loan debt, military spouses, low-income workers and others.”

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