TLDR
- Robinhood is launching checking and savings accounts with 4% APY for Gold subscribers
- The company will offer wealth management services with fees capped at $250 annually
- Banking services will include FDIC protection through partnership with Coastal Community Bank
- New AI tool called Robinhood Cortex will provide investment analysis and portfolio insights
- HOOD stock fell 7.10% on Wednesday despite the announcement of these new services
Robinhood has long been known as the trading app that democratized investing for everyday Americans. Now, the company is taking a bold step into banking and wealth management.
The Menlo Park-based fintech company announced it will roll out checking and savings accounts later this year. These accounts will be available to its paying “Gold” subscribers.
The high-yield savings account will offer around 4% annual percentage yield (APY) when launched. This rate is competitive with many online banks in the current market.
While offering bank-like services, Robinhood isn’t becoming a bank itself. Instead, it’s partnering with Coastal Community Bank to provide FDIC insurance protection on customer deposits.
This protection will cover up to $2.5 million, according to company statements. This is significantly higher than the standard $250,000 FDIC coverage at traditional banks.
The new banking services will include some unique features. Customers will be able to request cash delivery to their doorstep on the same day through the app.
This instant delivery service stands out from legacy banks that typically require several days for similar requests. It represents Robinhood’s approach to reimagining traditional banking services.
Wealth Management Expansion
Beyond banking, Robinhood is also venturing into wealth management with its new “Robinhood Strategies” service. This offering is already available to Gold subscribers and will open to all customers next month.
The wealth management service charges a 0.25% annual fee, capped at $250 for Gold members. This fee structure is competitive compared to many robo-advisors and traditional wealth managers.
“How can we take the best of all the models that are out there, from a human adviser who can provide you guidance and reassurance to robo-advisers that don’t provide you guidance and reassurance but at least give you a low-cost, easy way to access advice,” said Steph Guild, president of Robinhood asset management.
The wealth management offering will include access to both individual stocks and exchange-traded funds (ETFs). It aims to minimize taxable gains for investors.
Adding to these offerings, Robinhood will introduce an AI-powered tool called “Robinhood Cortex.” This feature will provide investors with analysis and insights to optimize their portfolios.
Market Reaction
Despite these new offerings, Robinhood’s stock didn’t respond positively. HOOD shares fell 7.10% on Wednesday, closing at $44.73.
The stock showed a slight recovery in pre-market trading on Thursday, up 0.89% to $45.10. This decline came amid a broader market downturn.
Wall Street analysts maintain a cautiously optimistic outlook on HOOD stock. According to reported analyst consensus, the stock has a “Moderate Buy” rating.
This rating is based on 14 Buy recommendations and 5 Hold ratings from analysts over the past three months. The average price target for Robinhood shares is $70.94, suggesting a potential 58.6% upside from current levels.
Robinhood’s expansion into banking and wealth management represents the company’s broader strategy. CEO Vlad Tenev outlined this vision at the firm’s December investor day.
The company aims to create a comprehensive financial ecosystem for its users. This strategy includes bringing investing, banking, retirement, and other financial products under a single brand.
These new offerings mark another chapter in Robinhood’s evolution. The company has moved beyond its origins as a platform associated with meme stocks to become a more diverse financial services provider.
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