Robinhood reported stronger-than-expected earnings for the fourth quarter of its fiscal year 2024, with revenue surpassing $1 billion for the first time.
The $1.01 billion quarterly revenue record, which marked a 115 percent year-on-year rise, outpaced the $934 million analysts had projected for the digital trading giant.
“It capped off a record-breaking year for the company,” CEO Vlad Tenev said during the earnings call discussing the results.
As reported by Barron's, transaction-based revenue at the brokerage firm more than doubled year-over-year, reaching $672 million, driven by a rise in cryptocurrency and options trading.
Beyond its earnings results, Robinhood is continuing its plan to enter a new market with its previously announced acquisition of TradePMR, a custodian that serves RIAs. The $300 million deal, expected to close this year, could put Robinhood on the same footing as established custodians such as Schwab and Fidelity.
“We see advisory as an enormous opportunity and will tackle it very aggressively,” CEO Vlad Tenev said during the company’s earnings call.
Robinhood, which built its business on self-directed trading, has been expanding its offerings to attract long-term investors. Aside from offering IRA and Roth IRA options with a match on contributions – a possible first outside the realm of employer-sponsored IRAs – Barron's noted it has filed with the SEC to launch a robo-advisor offering.
The TradePMR acquisition would build on those efforts by providing a direct connection to RIAs.TradePMR has worked with independent advisors for more than 25 years and has about 350 firms on its platform with over $40 billion in assets under administration. The deal would provide Robinhood a means to serve customers looking for higher-value wealth services, while potentially giving TradePMR's advisors a referral pipeline through Robinhood’s 24 million funded accounts.
“Robinhood builds a path into the wealth management industry for their clients who want to move beyond self-directed trading accounts while TradePMR gets access to a huge opportunity to gain new clients,” John O'Connell, founder of The Oasis Group, told InvestmentNews in reaction to the deal announcement in November.
Advisors InvestmentNews spoke to see potential advantages in the deal, including technology improvements and a broader client reach. Robinhood’s digital-first approach could appeal to firms looking for a modern custodial platform with automation and lower costs.
“For advisors, their end clients are also aging, so this could give an opportunity for certain advisors to be able to get access to a younger demographic of clients,” said Mike Watson, head of RIA custody at Axos Advisor Services.
But there are also uncertainties about how TradePMR will be integrated, especially given the number of Robinhood users who are invested in crypto assets – something TradePMR currently doesn't support within its Fusion platform. There's also the question of how comfortable advisors will be aligning with Robinhood given its history of securities law violations and other run-ins with regulators.
Some industry experts have noted that referral programs relying on digital matchmaking tend to have slow conversion rates compared to direct, relationship-driven introductions. Another possible friction point is the fact that Robinhood's platform does not currently support mutual funds, fixed income, alternatives, or insurance products, which are standard offerings at larger custodians.
Some industry observers say it could take years for Robinhood to fully develop a custody platform that matches the capabilities of Schwab or Fidelity.
“Robinhood is a full self-clearing custodian. There’s zero percent likelihood they stay on Wells Fargo,” said Jason Wenk, CEO of Altruist, referring to TradePMR’s current clearing arrangement. “They’ll have to build all of that stuff. Nothing will change for years.”
The acquisition is expected to close in the first half of 2025, pending regulatory approvals.
"Im glad to see that from a regulatory perspective, we're going to get the ability to show we're responsible [...] we'll have a little bit more freedom to innovate," Farther co-founder Brad Genser told InvestmentNews.
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