The End of Robinhood..

What is up, finance alert nation? I am your host, Graham Stefan, and let's get right into the news. Just kidding! I'm starting to feel a little bit like the drama alerts of finance lately, because we haven't seen this much money-related drama since last week when everyone started doing $0 trades.

Now, this week we have Charles Schwab taking it a step further and doing the unthinkable! They hit the like button for the YouTube algorithm. Just kidding! I had to throw that in there before I forget, but if you wouldn't mind doing that, greatly appreciated.

So anyway, real quick, before I get into all of this new drama, here's a quick recap of what's been going on, or the T as they say. Two weeks ago, Charles Schwab announced that they would be lowering their trading commissions all the way down to $0. Now, this was done in direct response to the growing competition between brick-and-mortar brokerages and free trading apps like Robinhood and M1 Finance, which appealed to these soon-to-be largest generation here in the United States: Millennials.

In an attempt to take market share away from Robinhood and some of the other free stock trading apps, they decided to forego all of their trading commissions so that they could undercut the competition and gain a stronger foothold on the market. And it worked! I saw so many people announcing that they were going to be leaving Robinhood and that they were so tired of all of their lackluster customer service. They were instead moving their money to the new king: Charles Schwab.

Not only that, but shortly after Charles Schwab announced $0 stock trades, it forced pretty much every other brokerage out there to follow the exact same thing and also offer $0 stock trades as well. But I gotta say, you know what? That news is so two weeks ago! Because last week, Robinhood strikes back, and they announced they're going to be releasing their new and improved cash management account, which is going to be offering people 2.05% interest on their money up to $1,250,000.

Now, that was a pretty big move against Charles Schwab, which, let's be real here, offers a pretty bad return on their high-interest savings account. Like, I find it funny that Charles Schwab calls it a high-interest savings account, yet it pays 0.23% in interest. That's almost like calling your Honda Accord a Ferrari Enzo! But you know what? Again, that's none of my business. Charles Schwab has severely low-paying high-interest savings accounts when you compare it with pretty much any other bank out there. But you know what? It is what it is.

So, I'm sure Robinhood knew this, and they figured, well, this would give them a slight advantage for stock traders who wanted to keep some cash on the sidelines. This might prevent them from going and leaving to go to Charles Schwab because they won't offer you a 2.05% interest rate. In my opinion, that was a pretty successful punch towards Charles Schwab because I have to say, Robinhood's cash management account seemed pretty good to me, and I actually joined their waiting list so I can put some money in there, because it's pretty decent.

But it doesn't end there! Because Charles Schwab decided to go back to the drawing board and try to one-up Robinhood again, and that brings us to what just happened today. So now Charles Schwab has announced that they will be allowing you to buy fractional shares. This means that instead of needing to spend $1,787 to buy one share of Amazon, you could buy one-tenth of one share of Amazon for $178.70. By doing this, the barrier to entry of investing just gets that much lower, and someone with only a few hundred dollars could buy and diversify into some of their favorite stocks with just a fraction of the cost.

Charles Schwab doing this, in my opinion, is really not only a direct attack on Robinhood, which doesn't allow any fractional shares right now, but also our beloved M1 Finance, which no longer really has any competitive advantage anymore. This also competes against other companies that frequently promote fractional investing like Stash, Betterment, and Acorns. Charles Schwab doing all of this could potentially undermine their bottom line, depending on when and how it's implemented.

Mark my words: Charles Schwab doing this is really just the beginning, and they nearly guarantee we're going to start to see other companies frantically responding over the next week, announcing all of these new features and services. Let me explain why.

Now, my personal belief when it comes to this is that a lot of the old-school brick-and-mortar brokerages have slowly seen their millennial money draining away into some of the popular stock trading apps that automate investing and make it very easy without any hefty fees. Think Robinhood, M1 Finance, and Acorns because, let's be real, those apps make investing so simple and so easy!

Like, on Acorns, you could literally set it up to round up your spare change and invest that somewhere for you without you even having to think about it. That's really good for like 99% of the population that has no idea how to invest and they just don't want to take the time to go and learn. But they know investing is something that they should be doing, so they could take a few minutes out of their day, set it up on an app that's very easy, and just be done with it.

A company like Acorns just solves that problem and builds that marketplace perfectly. So, I think that Charles Schwab is very much thinking long term in terms of their planned attacks because they know that Millennials are going to be the next wave of incoming capital. They have to capture them early and capture them young.

Just consider this: right now, there are 618,000 millennial millionaires, and according to a report by Coldwell Banker, by 2030 Millennials will hold five times as much wealth as they have today and are expected to inherit over $68 trillion from their predecessors in the great transfer of wealth.

Now, this great transfer of wealth is a term used when trillions of dollars gets passed on from the baby boomer generation on to the millennial generation, to then carry on its legacy of buying overpriced coffee and avocado toast. No, but seriously though, this is actually a pretty big deal! Because over the next decade, Millennials are going to have some serious spending power, and Charles Schwab knows this.

I think they understand this, and they know that whoever can capture this millennial money market first is gonna have all the profit! They're gonna have all the longevity, and they're not willing to lose that to the likes of Robinhood or M1 Finance or Acorns. To be seeing this just makes a lot of sense because, let's be real here, a lot of these stock trading apps have absolutely nothing proprietary about them.

There's absolutely nothing stopping a big company just from letting someone else, like one of the little guys, test the waters, see what works, see what people want, build up a fan base, and then they can copy it and crush them by just doing the same things but improving them and making them just a little bit better. Oh, Charles Schwab sees this way! They can capture all of the millennial audience with very little effort. Then they can get them using all of your services, and then the real money can start rolling in.

Because this is what I think is going to be happening. Now, let me preface this all just by saying I would not be surprised if some of the higher-ups from these companies are watching my videos and potentially getting ideas from them. I'm not gonna name any names here, but I will say that two of the companies that I have made videos on previously have personally and privately responded to me, saying that they're gonna be improving some of the features and implementing them that I mentioned in my videos.

So if that's the case, I'm saying all of this to help improve the investing features of everything and everyone out there. So whoever's watching this, feel free to implement any of these concepts or ideas at your own free will. These are just some ideas I have, but I also wouldn't be opposed to privately consulting for any of these companies as well because I do have some other tricks up my sleeve here. So if that's something any of these big companies are interested in, just send me an email or slide in the DM.

Anyway, though, here's where I think this is most likely going to go. First, I wouldn't be surprised if bigger brokerages like Charles Schwab just begin copying some of the smaller features of other apps as well. They know they want some of our millennial money, and one of the easiest ways to get that would be to implement the roundup feature that Acorns has. Implementing this would be incredibly easy. They can get even more passive investment on their platform, and they could essentially just improve everything about their brokerage with one swift move.

If they did this without charging any management fees at all, no hidden fine print, they could potentially destroy the competition! And this would be something I would personally use if it was really easy to set up or if they found a way to implement that within a Roth IRA for people to invest in a retirement account using a roundup feature. That is something I think is a billion-dollar idea right there. There you go, guys.

Secondly, apps like Robinhood really need to think about starting their own credit card. I think it's about time! Maybe instead of offering 2% cashback, you offer 1.5% to 2% back in terms of stocks that are invested on your behalf, even if you have to hold them for thirty days before selling. Just something like that gets people automatically investing using a credit card. I think that would be great! Or maybe you just offer a 0% interest credit card for the first 12 to 18 months, and that helps you unlock some higher tiers within the investing platform.

For the way I see it, a credit card would really help solidify people within the ecosystem of your own business and make it a lot harder for them to then leave. Think almost like the Apple credit card.

Third, I think a lot of these stock trading apps need to roll out banking features, and let's face it, if you don't have a bank and you don't have a high-interest savings account, you're nobody. Now, I'm obviously just joking about that, but also we have to admit that the high-interest savings account is the new it now. So, it seems to me like being an investing platform without offering some sort of cash management account or savings account that gives you a 2% plus interest rate just seems like backwards thinking to me.

And fourth, I believe that if Charles Schwab really wants to remain competitive, then they have to be the best at everything. Because I believe there's also nothing stopping Robinhood from going back and then allowing fractional shares, which I wouldn't be surprised it happens in the next 14 to 30 days. Then at that point, it's really just gonna be like a boxing match between all of the companies until eventually, they all just offer the exact same thing.

Then at that point, it really just comes down to which company has the most money is the one that's going to win and come out ahead because they're the only ones that could essentially afford to drive everyone else out of business until there's no one left. And I would just hate to see that happen. So, Charles Schwab, that means if you're watching this right now, you need to offer a better interest rate on your high-interest savings account, because paying 0.23% is just too low. You also need to eventually allow cryptocurrency trading like Robinhood does.

You also have to implement at some point a round-up feature that's linked to a debit or credit card. You're also going to need to automate investing a little bit easier, like other apps out there, and just make it a little bit more simpler for people.

And for all the other brick-and-mortar brokerages out there, I have a feeling that over the coming few weeks, they too are gonna be announcing out of nowhere that they're gonna be doing fractional shares—how original!

Anyways, let's not forget about what this is all actually for. Anyway, and that would be banking! That is probably where all of this is just going to end up. Whoever you're invested with right now is most likely going to offer you banking services in the future whenever you're looking to buy a house or get a loan, or park your money somewhere, or do whatever. That's what all of this is for.

It just seems to me like all of these perks being announced are really just like fish hook worms that get you to want to put your money with them, so that that way in the future, they could get a little piece of that pie. Then once you inherit some of that baby boomer money, then these companies are just going to be rolling in money and rolling in profit. Or this could be a tight squeeze from all the big companies to run these smaller investment apps into the ground, and then when that happens, companies like Charles Schwab might start implementing more fees, and then by that point, you got nowhere else to go.

But we'll see how all of this ends up playing out, because as of right now, all of this competition just ends up being better for you and me as the customers. It also means less fees and more money left over for you and me, which is just all positive. But I have a strong feeling that all of this competition is going to be continuing into the near future as all of these companies just compete to try to get your money.

And try to get you to smash the like button if you have not done that already. So with that said, you guys, thank you so much for watching! I really appreciate it as always. If you guys enjoy videos like this, make sure to destroy the subscribe button, destroy the notification bells so YouTube notifies you anytime I post a video.

Also, feel free to add me on Instagram. I post there pretty much daily stories—by the way, not posts, but stories almost daily. So if you want to be a part of it there, feel free to add me there. Also, if you guys are interested, I'm gonna pitch one of their competitors here: Webull. They give you two free stocks when you deposit $100 on their platform, and one of those stocks can be valued up to $1,000.

So if you want just two free stocks, just go and deposit 100 bucks, get the two free stocks. If you decide you don't like it after that, fine, but at least then you got two free stocks, and that's free money! I always love free money. So if you guys want some free money, that's the way to do it.

Oh, almost forgot! Add me on my second channel. It is called The Graham Stefan Show. I post there every single day that I'm not posting here. So that means if you want to see a brand new video from me every single day, now just going to add me on that second channel.

And again, thank you so much for watching, and until next time!