Hey, good morning to everyone in the room and those joining us on the webcast. My name is Steven Chubak. I am the diversified banks and brokers analyst here at Wolfe Research. Really excited to introduce our next speaker, Steve Quirk, Chief Brokerage Officer at Robinhood. Robinhood has delivered really impressive growth, and based on the latest presentation, which I believe you released today, really
We saved it for you, Steven.
I appreciate that.
Yeah.
Goes without saying. Reflects really strong market share gains across a broad range of products. You guys have been really releasing products at a breakneck pace, so there is certainly no shortage of topics to talk about across crypto, prediction markets, agentic trading. But maybe just to start, was hoping to talk about the market environment.
Yeah.
There's been a lot of market volatility.
There's been a lot of debate around which companies are going to be most impacted in light of a blue wave. You have names like AMD and NVIDIA, they're among the highest conviction holdings on the platform. Just discuss what you're seeing in terms of retail behavior and activity, and if you can distinguish between what you're seeing on the equity side as well as on the crypto side.
Yeah, maybe I'll start off with saying that we had our highest equity trading day last Thursday in our history, which is saying something when you think about Robinhood in the 2020 and 2021 era. That's a hard number to surpass. We surpassed it pretty significantly from a trading standpoint on the equity side. I'll just use that as sort of a way to kind of back into what customer behaviors look like. Remember, the average age of a Robinhood customer is 30s, and so we get asked often how we are the face of retail because we have 28 million plus customers. When we have volatile markets, we frequently are in the media talking to the media about what customers are doing, how they're behaving, they're curling up, et cetera, et cetera.
We can see it in deposits, we can see it in trading activity, we can just see it in sectors that they're buying and how they're performing overall. In a word, I'd say they're aggressive. They're cautiously aggressive, and what I mean by that is, they buy the dips. That's rewarded them. If you look at through probably most of their investing career, buying the dips has worked really well. The question becomes, this follow-on question is, what happens when there isn't a bounce back after a dip? The response that we have and our customers would say to them if they were speaking directly is, "We're 30. We have 30 more years of investing. We can look back to 1950 and see what the average return was." Will we have periods where there will be markets that might have a couple years of being down?
I do not know. Probably. Historically, if you look at it, there will be. But if I am investing with a duration that is 30 years, I have to be more proactive than I would be if I am somebody who is 50, 60, or So the composition of the way that our customers behave is different than I came from Schwab, I came from TD Ameritrade. It is very different because their investing duration is shorter, so they have capital preservation as a higher priority. So that kind of is what we are seeing. That and now you brought up crypto as well. Again, crypto is much more of a price-sensitive asset than equities or other asset classes. It is as price-sensitive as an asset as I think I have, in my career, that I have ever seen.
Was not planning on going down this rabbit hole, Steve-
Yeah, yeah
but I feel compelled to-
We can go down any rabbit hole. Yeah.
During the GFC, during the dot-com bubble, those were drawdowns where the severity was great enough
peak to trough declines
Yeah
35% plus
Yep
where you actually did see retail capitulation versus dip buying.
Yep. Mm-hmm.
You feel like amongst the Robinhood cohort, you would expect to see different behavior relative to those historical paradigms, or?
Steven, I can never say what the behavior is going to be going forward, because I actually wasn't at Robinhood at that period of time. I was at a competitor. I think that capitulation kind of happened broadly across the industry, regardless of segment. I can't anticipate what would happen should we end up in that environment again. I would point out, there's been a lot written about the COVID period and who kind of rescued the market, and it wasn't institutions. It was retail that was stepping in all the most battered names, and they were rewarded for doing so. I think it'll be Look, every market is going to be different, and the behaviors will be different, but I experienced this. I'll tell you a very funny story.
I'm that super annoying finance father of three daughters that work, just in the working space, just getting going, and I'm like, "Your money's going to work as hard as you work for your money, right?" You would need to open a brokerage account, put your money to work, et cetera. Every time the market goes down, they call me up and yell at me, like I'm the market. I'm like, "I am not the market, okay?" "Well, why'd you tell me to invest?" "I didn't tell you to invest. You made your own decision in what you're investing in." They now all do recurring investments, which means essentially, if you want to put $200 in a month, it goes in on a certain date into all the ETFs and stocks that they wanted to buy.
I said, "Just don't look at it." I can't use the word guarantee because it's not allowed in my business, but I will assure you, in 20 years, you will thank me. It takes all the emotion out of it. I think there are a lot of people who are younger that just, that's a good way to invest, right? You don't have to be in the market every day looking at it, to really have a positive investing journey. That's kind of the way they do it today.
Next time there's a market sell-off, I'll know exactly who to call.
They're going to. You call. Everybody calls and yells at me. Yeah.
Well, maybe switching gears just to talk about strategic priorities. You guys have been rolling out new products at a breakneck pace, as I'd mentioned, whether it's agentic trading capabilities, prediction market contracts, Robinhood Chain, and tokenized equities. With so many different initiatives underway, what are the two or three, Steve, that you believe are going to be most impactful in terms of the growth trajectory for the firm, and where are you investing the most dollars as a result?
It isn't necessarily always the most dollars, but maybe the most mindshare and resources might be a better way to think about it. Generally, it's going to be the ones that are newer, because the ones that are pretty established, we already have a working mechanism, working teams that are continually iterating on all those things like equity trading and option trading, crypto, et cetera. Some of the newer areas you mentioned are on the EC space, prediction markets. It's still a very new asset class, and it's evolving, and you are all seeing it evolve, whether it's from a regulatory standpoint, on a product standpoint. I think we're just scratching the surface of where this can go. It's been dominated to a certain extent by sports, but if you look at what's happening even within our world, the non-sports is doubled.
I think the way that we look at it is, it's not that different from a lot of what we're offering customers in terms of ability to invest in, whether it's economic indicators or KPIs, which are now going to be coming out, something that's akin to earnings, but it gives you a little more precision. It's kind of like a short-dated option, which allows you to be much more precise in your investing than just a blunt instrument, which would be buying the equity. Now, both work for people, but I think we find more and more people are curious and interested in getting a little more precision. So, the things that we have been focusing on and a little bit more is on the EC side, the prediction markets.
The other one is agentic trading, which is, I mean, look, it's really fast-growing, and we're over 200,000 customers that are utilizing that. There's just a lot there that is going to be really impactful for customers. It's a small segment of our customers thus far that have been utilizing it. It's always the most engaged that are there the quickest. But we're trying to create the model so that it becomes useful for a much wider audience, and we're starting to see that already. Number of people that are utilizing it all the way to trade on my behalf is much, obviously, a fraction of the number of people that are using it for portfolio optimization, investment thesis, tax optimization, and all the other things. Then the final one I would say is around TradePMR and wealth management.
If you look at what we've done there, I think we have so much more room to grow that business. One of the things that we've been really focused on is increasing the share of wallet, or gaining the trust from our customers to be able to bring more of their investable assets to us. Up to a couple of years ago, we really didn't have avenues for them to do that. When people said, "I either am accumulating wealth that I'm not comfortable managing," or, "I've come into wealth with this huge wealth transfer, and I'm just not comfortable managing this wealth either all, partially, or I'd like some help," we didn't have solution. Today, we have solutions. We have Robinhood Strategies, which is a managed portfolio, all the way to having somebody manage that for you.
We just started with the Robinhood Advisor Network, where we connect you with an advisor. We're in the early stages there, but I think we have a pretty good opportunity there. Big opportunity.
Steve, there's also been a lot of disruption, mind you, and we've seen firms like Fidelity are setting minimum thresholds-
Yeah. Mm-hmm.
they are raising those requirements. Do you see an opportunity to attract more RIAs to the platform? Maybe you are serving smaller clients, but feel like there is a lot of runway for growth or maybe earlier in their life cycle in terms of progression?
Yeah. I spent a lot of time at TD Ameritrade. When I started at TD Ameritrade, I am the self-directed person. I always ran that business, the retail self-directed for TD Ameritrade, but I had a close partnership with the people that ran the RIA business at TD Ameritrade. When we started, we were a 12th of the size of Schwab. When we got acquired by Schwab, we were half the size. The way we did it is exactly what you described. We swam upstream underneath them. If you look at what is happening with the largest custodians, they are just basically setting requirements that are kind of angering some of the RIAs. We have a lot of dialogue with RIAs that are very interested. We have the next generation of investors. They need the next generation of investors.
They know what happens when this wealth gets passed down. They tend to be dismissed as an advisor if they do not have a relationship with the recipients of that wealth. I think the other thing is, a lot of the really large ones that are sort of aggregating other ones, they are very interested as well. So it sets us up in a unique position. I think the part that is intriguing to them is really two things that really intrigue them. Number one, we have 28 million people that are recipients of this $124 trillion wealth transfer. Establishing that relationship is a key for them. Number two, we are a tech-forward company, and we bring innovation, and we can help their businesses become more efficient so that they do not have to have a $500,000 minimum or a $250,000 minimum.
We can help them become efficient enough that they can run that business at a scale and be profitable.
Interesting. The other piece I wanted to double-click into, because you were talking about prediction markets earlier and how much resources you are putting behind that. Sports have been the dominant contracts.
Yeah. Mm-hmm.
Where folks have been transacting on the platform. Does feel like the mix is starting to evolve and shift towards whether it is economic releases.
Certainly around the midterms you saw a lot of activity.
Yeah.
How do you see that mix evolving over time, and where do you see the most compelling opportunities for growth within the prediction markets ecosystem overall?
I think the areas that are going to see the most growth are, of course, our non-sports. That might be driven by the Supreme Court, right? I mean, we all know that this is probably headed for the Supreme Court. But I think what makes it such an interesting area for us is we're really unique. Robinhood's super unique in that we're a scale player across all these planes. We're a scale player. Most of the market participants are a scale player in this area, right? Let's call it either crypto or event contracts, prediction markets, or brokerage, or even banking, right? We're a scale player across all. As a result of that, the areas that are most interesting in the event contracts prediction markets also apply to the securities world.
The KPI options and all these other things that are really kind of forks of event contracts or prediction markets are very applicable to our current customers. For us, it's really kind of an extension into other asset classes and products that can be delivered, absent sports. I think that area and where that goes, there's so many tangents that haven't even been explored. I mean, we've got an extreme with insurance and things like that. But you can imagine a world where this starts to fork into a lot of really interesting areas. Again, as I said, we are regulated on the CFTC side, we're regulated on the SEC side, we're regulated across the board. Where they end up and who's regulating them, we're kind of agnostic.
We have opinions and we share our opinions, but I think that will have less of an impact on us than it will on primary players across those sectors.
Steve, in the presentation you guys just released today,
Yeah
you do show really strong market share gains across each of the different product areas.
How much does the ecosystem that you're building around prediction markets help contribute to that, and what are the primary drivers of the active traders that are switching to Robinhood? Is it a function of price disruption, where you guys offer more competitive pricing? Is it the technology, or what are really the capabilities that are resonating most?
I think it's a combination of really all of them. It's been building out the offering and making sure that everything that a customer would want, whether I'm an active trader or even somebody who's a more passive investor, just in that they're really kind of a lot of the basic building blocks. So account types, trust accounts, joint accounts, multiple margin accounts. These are just not the sexiest things, but they're really important for people who are investing with larger sums of money. And then the asset classes and all the capabilities associated with it. We flipped. So when I first got here, we had a model that was not a model that anybody would envy. Our most engaged customers had our worst NPS. And today, our most engaged customers have the highest NPS, which is what you would like. But also, the account size has grown pretty dramatically.
I mean, again, this account size is small. If I look at Schwab, if I look at Fidelity, if I look at all the legacy firms, I call them legacy, their account sizes are hundreds of K, right? Ours is 15-ish. But it came from three, and when you have 28 million accounts, it is hard to move that number up. We are net positive ACAT from every single broker. Net positive ACAT from every single broker. That is really telling. I think what Chris and I were talking about this this morning, and Glenn as well. If you look at that presentation, there are a couple things that really just stand out. We are 10% of U.S. households average 18 and over, we have an account with us. However, look at the assets. It is just a minuscule portion of the investable assets in America. To me, the upside is pretty magical.
We have an opportunity to do some really cool things going forward. If you look at the demographics, of course. They are in wealth accumulation phases. They are in the phases of a place where they are going to grow their relationship with their financial service provider across the spectrum of all the things we do. I think that is exciting to me. The second part, I am taking us on a little tangent just because it was in this presentation. If you look at U.S. households, percentage that are in the market, let us call it 60%, then you look at every other country, the highest one, I believe, was Brazil, which was 12, but otherwise, they are all single digits. Every time we go somewhere and open an office, because we have started to expand globally, they are very, very eager to start a relationship with us because they want that.
They do not want single-digit participation in capital markets. That does not bode well for them when those people become retirement age or else. We have a proven model to actually drive that to a higher level. I think it is just kind of a setup to say, as amazing as we are doing right now, when I look at it, the windshield is so much bigger than the rearview mirror. It is actually really cool.
I guess the question that some investors struggle with is the notion of, do you guys have a broad enough capability set? Because you solve for the RIAs.
Yep.
As these customers start to accumulate more wealth, you're going to have that managed offering for them. But do you have the broad suite of products where, as they accumulate more wealth-
Yeah
you can service all aspects of their life? Where are you guys in that journey?
I would say, so it's almost like broad offering, things like prime, portfolio margin, trust accounts, all those things. I would say we're probably in the seventh inning. We still have some things to do from an asset class standpoint, from an account standpoint, just complete breadth of offering, but we're not that far away. Even if you look at what percentage of assets are in our customers' or other customers' accounts, we probably have 80%-85% of that covered. The question is, what I often get, I'll give you a funny story. We do a partnership with 22 universities called Money Drills, and we go to different schools and we talk to the students about financial literacy. We sponsor a program. It's an accredited course, it's a one-credit course, life skills.
I was at the University of Wisconsin, which is where I went, a little biased there. But hundreds of kids in a room, and I'm like, "Who's got a Robinhood account?" All of them go up, and I'm like, "How many of your parents have an account?" They're like, "Oh, no, our parents wouldn't open an account with you." I'm like, "Why wouldn't they account?" The guy's like, "Well, my dad said that he thought you guys are like that GameStop thing." I said, "Have you ever showed your dad what we have today?" He goes, "No, no, he's on that legacy thinking, that all you are is a free stock trading app." I say that because I think there's such a good opportunity for us from an awareness standpoint to just make. We're starting to see it.
We see it, like a lot of the accounts that are rolling over from other brokers, these are $100,000 accounts. They are not small accounts, but it just takes time.
You did mention regulation earlier.
Yeah.
I would be remiss if I did not pivot to just a discussion around prediction markets regulation.
Yeah.
It might be helpful, Steve, if you could just walk us through the game theory around, like, if it is done regulated at the federal level versus the state level, what types of activities could potentially be restricted. Just help us think through how that could potentially play out over the next few years, given how meaningful of a contributor that has become to your overall revenue base.
Yeah. I cannot predict where it is going to land, because I do not even know when it is going to land in the Supreme Court, if it does. Look, the thing that is always in contention is just sports. I do not think anybody. There really is not a lot of conversation amongst all the parties around anything other than sports. Look, a lot of the states make a lot of money on the sports OSBs, so there is vested interests. We always prepare for a world where something does not exist. Where that does not exist, we still have, as I kind of brought up earlier, a robust offering there, and an ability to continue on in whatever capacity we need to. I would also point out, because we are talking about litigation in the EC space, but there is litigation also going on with perps and other areas.
Again, this is where having the ability to be on either side of the fence is really helpful, because you see the KPI options that we are launching with the Cboe. Those are not in this world. They are in this world, and they are similar to what is being offered in either world. So, it kind of gives us optionality to be able to go wherever we need to go. The customers have. We are delivering for the customers. They are interested in these products, so they are going to want a continuation of that wherever it ends up.
One of the other capabilities that you guys also launched recently, and you touched on this earlier, is agentic trading.
Yeah. Mm-hmm.
You mentioned that you've seen a nice uptake amongst a sleeve of customers. How do you see this playing out over the next few years, and what are some of the changes that you're making to the platform to make it more readily accessible to a broader universe of Robinhood customers?
I think we started off by It's a really interesting area because we're really good at testing and learning and just watching customers' behaviors and listening to them and what they would like. We started off with allowing them to plug in their agents, and now we've evolved to our own agents. I think what a large segment of at least our audience is looking for is, they have a curiosity, but they need help. They need help in setting this up. They need help in understanding the utility. They need help in understanding where and where they shouldn't be using it. You're always going to get the most engaged that'll go all the way to These are the people that are scanning and scripting 10 years ago, and now they have an ability to do that in a much simpler fashion.
I think the audience of people that are going to use it for tax optimization, that are going to use it for portfolio rebalancing or diversification, or even finding investment opportunities is going to grow pretty rapidly as they start to understand the ease of use and how much it saves them from a time standpoint. All those capabilities that we build, whether it's in agentic trading or Cortex, which is our advisor within the self-directed side, we also cascade to the RIA side as well. Now, they have different use cases, but those capabilities all are going to get shared there. I would say there hasn't been a lot of innovation, at least from my seat, on that side of the business. So I think when we talk to them, as enthusiastic as retail investors are, there's even more enthusiasm on that side of the business.
Are you seeing any evidence that the folks that are leveraging these tools-
Yeah
are more engaged in the platform just more broadly as we think about what that means for activity rates or potentially any revenue uplift as more customers grow more comfortable leveraging some of these tools and capabilities?
When you start off, you're always going to get the most engaged people. Are they more engaged? Are they doing more? Yes, but that's kind of the case with everything when you first roll it out. I think over time, we'll get a better read on exactly what it does. It's hard to imagine a world where you don't see an uptick in activity as a result of it. But we'll have to watch over time to see how that's sustained.
One of the things that I know you've been very focused on is also top-of-funnel growth.
Yeah.
Shiv talked about that on the 3Q call as being a real priority. What are some of the efforts that you're making to drive bigger gains at top of funnel, whether it's marketing campaigns or promotional activity, and how should we see that growth unfolding over the next, say, 12 months?
Yeah, I think we've made a stronger focus on that top-of-funnel growth. I think the thing, and again, from my seat, what I can do, and this is what I continue to work on, is just continuing to build out the offering that's going to attract those customers. Now, again, as I said, in five years, we came from a place where we were losing customers to every single broker to now taking customers from every single broker. So I think a continuation of that will be strong, but also filling the top of the funnel means creating an awareness about all the things that we do. As I mentioned earlier, there is some legacy thought about what Robinhood is.
I also think initiatives like the Trump Accounts work that we've done with BNY, Treasury, IRS, National Design Studio, and the whole gang has been really interesting because it's opened a lot of doors for us with employers who contribute, with individuals, philanthropists, just with that whole ecosystem that was a little bit new to us. But it's really been a very cool exercise.
Maybe let's try to transition to a discussion just around net deposit growth.
Yeah.
As you start to see some progress with top-of-funnel efforts and the like, you guys have put out a 20%+ net deposit growth target. That, of course, gets more challenging to sustain as the denominator steadily grows. Just speak to some of your efforts to drive that 20% growth sustainably, and what's going to be the new unlock that supports not just durability, but maybe even some upside, whether it's international or the RIA piece you were talking about earlier?
I think the RIA piece and international will be big. International, we're so new in overall scheme of things. But I think the RIA piece will be meaningful. It will be more meaningful. But I also think just a continuation of what we're doing in the core brokerage will be really helpful. I know the numbers we shared, and Chris was mentioning this this morning, I think this is our third-best month in terms of deposits in October, and we're not that far away from 20% on the year already, and we've got another month to go. So, even with the larger base, I think we have some really good indications that we'll be able to continue it at this pace.
Given your efforts on the international side, how do you see that growth trajectory unfolding? If I overlay international
Yeah
versus the U.S. growth for Robinhood, it doesn't look wholly dissimilar, but we haven't seen that exponential ramp quite yet.
Right.
How do you see that materializing given some of your efforts abroad, and how is that resonating with customers?
Yeah, I think we're I mean, as I said, when we go to places, we're in a couple places. We're in Singapore, we're in Dubai, we're in the U.K., we're across a lot of Europe, like 30 countries. But 80% of what they want, we already have. But the additional 20% is really important to them, like local execution, all the retirement products that they have that are unique to that country or that region are meaningful. And oftentimes, that's where the lion's share of their investment dollars sit. We have to go there with our 80%, which capital markets in the U.S. are the envy of the world. A lot of people want to invest in them. But then you also have to do the other components if you're going to get their share wallet, a fair share wallet, and attract people.
I think that's the phase that we're in right now. But I would assume that once we get that, the ramp becomes so much easier, because we basically then compete with the local entities, and there's a I told this to Vlad when I got here. I'm like, "I used to be international quite a bit with Schwab and TD Ameritrade." Because every country I've ever gone to, there's a Robinhood of the U.K., there's a Robinhood of Australia, there's a Robinhood of pick it, whatever country. I'm like, "Let's just go be the real one, like the OG.
Like, why do we have these knockoffs?" And the first thing that happens when we get to those countries is those knockoffs come and like, "Hey, would you like to buy us?" And we're like, "No." "I think we're going to do something else." I think I'm enthusiastic, but it takes a while to get traction there. It's like seeds. You got to plant seeds, and they take some while to blossom.
Two elements that I wanted to dig into as it relates to driving higher engagement.
Yeah.
One was the pattern day trader rule.
Yeah.
The other is the launch of crypto perps.
Yep.
They are not necessarily related, but if you could just touch on what you are seeing in terms of client behavior and engagement, and whether you are seeing an uptick in activity on both of those fronts as a result of some of the changes that we have seen.
Yeah, the pattern day trade rule went away June 4th, and we had our best quarter in the 3Q, so that kind of tells you what happened there. That rule was such a I had been working on that rule for a decade to get that taken away. The rule had utility when the dot-com bubble happened, because risk management and such were not in a place either at the brokerage firm or the clearing firm that they were able to navigate it. The rule, well-intentioned, and it had utility, but then five years later, it really did not. So, credit to the regulators for making that change. It really opened up the ability Look, I do not want to be a Try explaining a pattern day trade rule to 28 million customers. It is like a scarlet letter on them, and they do not even know why they have it.
They don't get it. "Oh, I traded four times, same instrument in five days? What, you want me to hold it now instead of selling it?" Really weird. But it just opened up avenues for them, smaller investors, which of course very much unduly impacted our customer base, to do whatever they would like to do. As a result of that, not only did we see increase in activity within our customer base, but we of course went the best way to get out of a PDT is go to a different brokerage firm. So at one point, it's like 40% of our ACATS are going somewhere else because of this stupid rule. So of course, we reached out back to those people who never wanted to leave Robinhood and said, "You can come back now," which is already underway.
Regrettably, I'm not going to have enough time to maybe ask you about perps, but maybe it'll be part of your response, Steve, if you can indulge me. But for my last one, just looking at my notes from the last couple of years, if I think about what was the big theme two years ago was the Trump Bump.
Obviously a lot of enthusiasm around crypto. Last year it was prediction markets. This year was agentic trading.
What's going to be the big thing for next year?
Well, every single one of those things was probably not anticipated. I think it brings up a really good point that I would say Robinhood is This is what makes Robinhood so unique in every place I've ever worked, and I've worked at some startups in the brokerage space. We just have the ability to capitalize on whatever it is coming and pivot really quickly, and to be able to take advantage of it. Our customers come to Robinhood because they expect us to be at the forefront of all these places. Not only being at the forefront, but being there first and being there with a quality offering is what drives it. As far as which one's going to be the next one, I can't say. Now, perps are red hot. I'll include that.
The funny thing about perps is, they're sort of a hybrid of products that we already have and products that we don't have. They have utility in that they, again, are perpetual, so it's a hedge if I don't want to You've all heard the example that I think we used. If I have crypto gains and I don't want to lose them, I have the ability to hedge that indefinitely. If you really look at the way perps are traded, I think the entities that trade them have put these numbers out. The average duration of hold is 12 hours. They're leverage. Perps are leverage. That's what they are. Leverage instruments are popular in some segments of investing. I would not anticipate we're ever getting to a world where we're going to see the leverage that exists overseas in U.S. perps.
If we do, then I completely misread our regulatory environment. Since half of our legal team comes from regulators, I would be very surprised if that's the case. I do think they provide a utility that's useful for customers. So, I could see those getting quite a bit of traction, and they've got a lot of attention.
That's great. Well, I know we're a couple minutes over, but Steve, thanks so much for being here.
Thank you.
Really appreciate it.
Thanks for having me.