About ten months ago, I discovered a startup promising
commission-free investing for the masses. Despite believing that too good to be true, I joined the waitlist at the
55th spot. Robinhood’s app
released to the public yesterday and I couldn’t be more thrilled to be sticking
it to the Jordan Belforts of the world. $10 per trade, while not prohibitively
expensive, does force some digression in investing than might be prudent. The app’s interface is gorgeous and
streamlined but further commentary must be reserved until I’ve used it more.
Robinhood is just the latest in the larger democratization of finance trend. The finance industry is notorious for being stuck in the past. Despite advances in technology reshaping almost every facet of everyday life, finance relies on infrastructure invented during the Nixon administration (ACH being the archetype example). In areas where it does excel technologically, banks keep the advantage to themselves. Yet in a part of the world hell-bent on the disruption of any and all industries, Silicon Valley has taken it upon itself to shatter these bastions of a bygone era.
We saw Wealthfront in the last post, which is making algorithmic investing available to everyone, not just hedge funds and other groups with staffs of math PhDs. As a counterpart to Edward Jones and other wealth advisors, SigFig delivers quantitatively sound investment picks in a manner understandable without needing a degree in finance. If you happened to see GoPro’s S-1 filing, you’ll notice it was underwritten by the usual suspects, JP Morgan, Stifel, Citigroup, and the rest of the big banks. Upon closer inspection, you’d notice that a young startup called Loyal3 was given 1.5% of the new shares to offer to the public at large for the IPO price. Prior to Loyal3, a lay investor could only buy shares in the secondary market, typically for substantially more than the banks paid. But now, the spread between IPO price and open market prices became accessible to everyone, or at least the lucky ones that snapped up those shares as soon as they were available. (Twitter is an excellent example of this, with an IPO price of $26 but starting in the open market at over $41, a risk-free profit of more than $15 per share for the underwriting banks.) Slowly but surely, we are seeing the finance industry become more equitable, and more accessible, to the general population.
So niche startups like SigFig, Loyal3, Betterment, Quantopian, Self Lender, Stripe, and the rest wield technology to make finance easier for everyone. Now we have Robinhood to add to this crew: a company competing with existing brokerages without charging any commission at all. At the time of this writing, there are about 500,000 people on the waiting list. Wall Street ought to take this as a warning shot: old ways and manual processes will continue to fall in the wave of new technology. On the other hand, they might surprise us all and welcome the competition.
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Robinhood is just the latest in the larger democratization of finance trend. The finance industry is notorious for being stuck in the past. Despite advances in technology reshaping almost every facet of everyday life, finance relies on infrastructure invented during the Nixon administration (ACH being the archetype example). In areas where it does excel technologically, banks keep the advantage to themselves. Yet in a part of the world hell-bent on the disruption of any and all industries, Silicon Valley has taken it upon itself to shatter these bastions of a bygone era.
We saw Wealthfront in the last post, which is making algorithmic investing available to everyone, not just hedge funds and other groups with staffs of math PhDs. As a counterpart to Edward Jones and other wealth advisors, SigFig delivers quantitatively sound investment picks in a manner understandable without needing a degree in finance. If you happened to see GoPro’s S-1 filing, you’ll notice it was underwritten by the usual suspects, JP Morgan, Stifel, Citigroup, and the rest of the big banks. Upon closer inspection, you’d notice that a young startup called Loyal3 was given 1.5% of the new shares to offer to the public at large for the IPO price. Prior to Loyal3, a lay investor could only buy shares in the secondary market, typically for substantially more than the banks paid. But now, the spread between IPO price and open market prices became accessible to everyone, or at least the lucky ones that snapped up those shares as soon as they were available. (Twitter is an excellent example of this, with an IPO price of $26 but starting in the open market at over $41, a risk-free profit of more than $15 per share for the underwriting banks.) Slowly but surely, we are seeing the finance industry become more equitable, and more accessible, to the general population.
So niche startups like SigFig, Loyal3, Betterment, Quantopian, Self Lender, Stripe, and the rest wield technology to make finance easier for everyone. Now we have Robinhood to add to this crew: a company competing with existing brokerages without charging any commission at all. At the time of this writing, there are about 500,000 people on the waiting list. Wall Street ought to take this as a warning shot: old ways and manual processes will continue to fall in the wave of new technology. On the other hand, they might surprise us all and welcome the competition.
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| "Nasdaq congratulates Robinhood on their launch" |
