Updated: May 20
A $65 million dollar fine is no small pill to swallow, regardless of how much money you’re making. Robinhood has been the darling of 2020, a year when first-time investors have flooded the market. But with cases like these on the rise, it’s time to really investigate who you’re doing business with and how they’re making money off your assets and activity. It’s time ask whose interest your broker has in mind, yours or theirs. It’s time to scrutinize their practices and ask yourself if they are fair, honest and transparent.
Investing has long been a world with lots of grey areas and questionable practices. While they mostly fall within regulation and the law, many of these practices don’t necessarily put ordinary people’s interests first. The market was never originally set-up to do that. That was just how things were. But that leaves a huge white space. One that All of Us intends to fill.
When you look back at the history of self-directed investing, Schwab was a first-mover revolutionary. Not only were they a disruptor in giving access to the market to the wider population, they made it seismically less expensive. Then E-trade and a number of others came along and slashed fees even further. The race to zero had begun. Enter Robinhood, who dropped the neutron bomb of no-fee trading. It took a minute, but the pressure they put on the industry caused it to buckle. In 2019, pretty much everyone dropped fees to zero. In quick succession, mergers happened. The landscape leveled. The revolution happened right before our eyes. And then it was over.
Or maybe it was all just setting up for another chapter. That’s the problem with being the rebel force. Should you win, suddenly you’re the establishment, and all eyes are on you. Robinhood has done a lot right. They moved the ball down the field. They advanced the democratization of trading. They brought lots of new people, many of their 13 million or so customers, into the market. That’s an incredible feat. But it comes with a responsibility. One that I feel they have largely ignored, and it seems the SEC is thinking along the same lines.
Investing isn’t a game, and making it feel like one is a dangerous and largely irresponsible thing to do. It takes education, research, and due diligence to make an informed choice. Many other competitors who have sprung up in the space seem to believe that social feeds are the answer to this. Giving people the ability to share ideas with each other which, while interesting, is also potentially dangerous. It’s one of many ways to get information, but one should never make a decision based on just that. Some brokers have started to allow copy-trading. Simply put, you can find someone whose portfolio you admire, and set up your portfolio to mirror theirs.
Some brokers are allowing their members to share ideas in group chats. Others are allowing peer-to-peer idea sharing. Investing has always been about finding and sharing information. But it should never stop there. It should never be the lynchpin for a decision. That takes research and analysis. Skipping this step leads to trading on noise. The fact is decisions need to be made on signal. Without that, you are almost certain to lose money. That’s a proven fact. You need to look no further than Facebook’s struggle with fake news to understand. Oh wait, you can also look at Twitter, Instagram and even TikTok. The stunning documentary The Social Dilemma made that abundantly clear.
Decisions should always be made in an informed manner. Proper data analysis is key. What story is clearly laid out in the numbers? As we gain more and more members, we are digging deeply into the science of data. Finding true signals in the numbers. Using those truths to provide enhanced information to our members about what others are doing on the platform so they can add new weapons to their decision-making processes. It’s one thing to provide social data, a whole other to provide social data run through an AI-informed, data science machine that learns as our community grows. That’s at the heart of All of Us. A desire to create and foster true investor empowerment. To work more for the interests of our investors than our own. That’s the promise of All of Us.