ROBINHOOD STRIKES BACK - THEIR RESPONSE!

Well, ladies and gentlemen, it happened. Amid all the controversy surrounding the recent $0 trade announcement started by the internet bully Charles Schwab, Robin Hood just seemed like it was destined for loss with no competitive advantage whatsoever. That was until today, because Robin Hood strikes back, unveiling a new cash management account that pays a two point zero five percent interest rate. And this time it's actually different, also known as it's not a complete PR nightmare mishap like it was the first time.

See, ten months ago, Robin Hood released what they called a checking account. And notice I used the term checking account very loosely. The promise here was the checking account would have no minimums, no fees, and pay you a three percent interest rate, which was unbelievably high, like to the point where three percent was just ridiculously higher than anyone could possibly fathom was doable. But there was a problem, because for anyone that actually read the fine print, you would see that they're technically not a bank and their checking account was really just an extension of their brokerage account that was not FDIC insured.

However, Robin Hood promised that this account was instead covered under SIPC insurance, which covers investment accounts up to five hundred thousand dollars. So if Robin Hood ever ran out of money or the company went out of business, SIPC insurance would step in to make sure that you get all your money back up to that amount. Robin Hood claimed word for word that because the checking and savings products are technically part of a brokerage account, they would be protected by SIPC like other brokerage assets. People could trade stocks and other assets through the brokerage using money in these checking and savings accounts.

Now, it sounds legit, kinda sorta, okay not really, until it came to light that SIPC never agreed to cover Robin Hood's assets because they only cover funds used with the intention of purchasing securities. So by Robin Hood calling it a checking account, they basically just screwed themselves over by admitting that people are gonna be using this for banking services and not to be used towards buying securities and investments. The entire thing was really just a massive disaster.

I covered my skepticism in a video just a few hours after its announcement, and then a day after that, they basically just tried to scrap the entire idea, sweep it under the rug, and then pretend like it never happened. Then after that, they announced that they would be revamping the idea and coming out with something new in the future. And today is now the future. We are in the future of Robin Hood's future, because that future is today.

Now, right now, see, once Charles Schwab announced their zero dollar stock trading, followed by pretty much every other brokerage out there, all of a sudden Robin Hood didn't really have any competitive advantage over these well-established banks. But they were able to pull this one trick out of their sleeve that other brokerages aren't really able to offer. And it's just this: drum roll, ready for it? Their new cash management account.

Like I said, this is an entirely new product by Robin Hood which offers you a two point zero five percent return on your money. According to the co-founder, it is entirely different and separate from a checking or savings account. Let's make that very clear: it is not a checking or savings account; it is a cash management account. So if the SIPC is ever watching, it's not that, it's cash management.

Now, obviously, they have to make this distinction very clear so they don't get in trouble anymore. But honestly, looking at the account, I have to say it looks really, really promising. And just to show good faith that they aren't going to be getting in any more trouble with the FDIC or SIPC, they've hired on the SEC Commissioner Dan Gallagher to their board of directors. So this way, they've covered all of their bases and they could show us that they're gonna be following and complying with all rules and regulations.

So here's how the cash management system works: it works by pooling your money together in one place, and then it sweeps that money across other affiliate banks which then offer you FDIC insurance. This means you can have one centralized location where you could view all of your money, even though technically it's split among several partner banks.

Now in this case, Robin Hood is partnering with Goldman Sachs, HSBC, Wells Fargo, Citibank, Bank of Baroda, and US Bank. All of that combined could give you one million two hundred and fifty thousand dollars worth of FDIC insurance, all paying you a two point zero five percent interest rate. Now, of course, as we all know, the interest rate set on these accounts could fluctuate month-to-month, reflecting the interest rates set by the Fed. But I have to say, for the most part, the 2.05% interest paid is pretty reasonable, and it's really on par with what many other banks are offering, which is something I will cover very shortly.

Now, in addition to the 2.05% interest that you get paid up to the one million two hundred and fifty thousand dollars, you're also gonna be getting access to a debit card linked to your Robin Hood account, issued by Sutton Bank. And according to Robin Hood, that debit card will give you access to up to seventy-five thousand free ATMs, all without foreign transaction fees, no maintenance fees, and no account minimums.

Meaning that Robin Hood will make a little bit of money from the small transaction fee the merchant pays every single time you use a debit card, as well as probably some money paid by the affiliate banking partners. So yes, Robin Hood will end up making a little bit of money from you in the process, but they offer you a lot more in return for free. And honestly, good on them for doing this, because to me, it makes a lot of sense.

Like last week of my video announcing the zero dollar stock trades, I predicted that these companies are going to be moving in the direction of banking because this is where they can end up making way more money. And evidently, Robin Hood was the first to really take a shot at it, and this is exactly what I predicted here.

I believe this opens the door for many other companies to get into the banking business model, which is where I believe a lot of the real money is. Like, why bother trying to get five dollar commissions when instead you can get someone's entire life savings under management? You could get them using your checking and savings accounts, and then eventually you can offer them auto loans, personal loans, and mortgages. Then at that time, you could just make way more money. So I believe this is Robin Hood's first step into providing banking services in addition to free trading.

And if my predictions come true, I have a feeling they're soon going to get into the business of offering loans, debt consolidation, and maybe mortgages, which if done correctly, they could grow to levels not last seen since Lehman Brothers. That was a joke, a bad one, but that was a financial joke. They don't need to be funny, but that was a joke.

But anyway, all things considered, all of this seems pretty good, and I joined their waitlist because I want some of that 2.05% interest. And if you're wondering now how Robin Hood compares with other banks and what they offer, I have to say, it's decent. It's not the best, it's not the worst, it's just too. For example, right now, the best return you can get from pretty much any bank out there overall is from Vio Bank, paying you two point four two percent interest on your money.

You also have My Savings Direct, which offers you a two point one percent interest with absolutely no fees or minimums. Or you have Wealthfront Cash Management, which is a two point zero seven percent return FDIC insured of up to one million dollars, again with no fees or minimums. And then, of course, you have other similar banks like CIT Bank and Citibank. And then we have Robin Hood.

In my opinion, what Robin Hood is offering right now is good; it's just not mind-blowingly good. It's high enough to get your attention without being unbelievably high, and it's competitive enough to compete against zero dollar brokerages without being obnoxiously so. And I think this is a really smart move on Robin Hood's behalf to do this now, at a time where they really need it the most.

Plus, it seems like they've learned from their past mistakes by offering much more clarity in the context of the account and exactly what the expectations are. But at the same time, it isn't necessarily revolutionary, and other banks have been doing this already. But it is a massive step in the right direction for Robin Hood and definitely a sign that they want to put the customer first and they're listening to what we have to say.

And I really hope in the future that they can continue to expand their banking services or maybe offer some sort of banking incentive to people who trade with them or people who have cash management with them or vice versa, or maybe one day, they just begin offering low-interest rate loans or auto loans or mortgages or debt consolidation. Or maybe even one day, wait for it, they're gonna open up a credit card.

I have a feeling, I have a feeling, here's my prediction: one day, probably in the next year, they're gonna open up their own credit card. It's gonna be partnered with one of those affiliate banks that they're currently with right now. It makes sense. Robin Hood, if you're listening to this video right now, open up a credit card; that's your money maker right there. Give two percent cash back on everything, and I guarantee you, do that with no fees and with integration into the app, it's gonna be such a hit.

That's all you need to do. In fact, you know what? I should open my own credit card. If anyone knows how to do that, just send me an email. I need the avocado toast 20 cent iced coffee credit card. Would love that one day. Anyway, let me get back to the video.

So going back to Robin Hood here, the only other thing I would like to see them improve is probably their customer service so that you could call a phone number and really speak to someone live twenty-four seven. I feel like that small differentiation will make a huge difference in their entire business, and one of the reasons why I believe they're being held back against some of these bigger banks that offer just so much more in terms of customer service.

And as for me, I've already signed up for their cash management accounts just a few hours after it was announced. And like, I'm already like eighty thousand on the list. But given all this information, I'm hoping to put some money in the account and see how it goes, get some of that two percent interest, and just have something to report back to everyone on. I ended up testing this out before with Wealthfront and was incredibly happy with how that went, so I moved more money over to Wealthfront in conjunction with Ally. So I'm hoping to do the same thing now with Robin Hood, and then I'll do a video just updating everyone on what my experiences are and how the whole platform is.

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Anyway, this outro is way too long. Thank you so much again for watching, and until next time.