Robinhood Markets, Inc. ($HOOD)

All right, everyone. Welcome back. It's my pleasure to introduce Steve Quirk. Steve is the Chief Brokerage Officer at Robinhood. Robinhood, as you all know, is a mobile-based retail brokerage platform, multi-asset class offering across cash equities options, futures, index options, prediction markets, crypto and banking now. Steve is a 35-plus-year veteran in the brokerage industry.

[ Back ] Thanks for having me again.

All right. So let's talk about the environment. The stock when I wrote this question list had been on a nice run over the last 2 weeks, remains well below the highs we saw last year. Market seems to be signaling that something has changed in the retail landscape. From your seat, what does the retail environment actually look like today? How is customer behavior evolved in recent quarters? And then if you can share any comments about May, we saw things were pretty positive in April, but anything you can say about May, I'm sure everyone in the audience would appreciate it.

Sure. Yes. I would say like the overall health of the retail we're 27.5 million retail customers. So we often get asked how are they navigating this market environment. And if I go all the way back to when we've seen these dips around tariffs and things, they've been pretty aggressive dip buyers. And sometimes that causes concern, oh, what if it keeps going. Well, their average age is 30. They have many, many years to invest, so they should be aggressive at this stage, which is not something you hear people say a lot, but it's the truth. But generally speaking, I think in April, we had our second highest month in equity trading, option trading, highest month in [ futures ] and in prediction markets. And in May, it's been very strong. I'm not supposed to say how strong, but I can say strong. They will let me.

Is the upper case strong?

Upper case. I can [ afflict ] it the way I want to [ inflict ] it because that doesn't show up on a [ trend ].

There you go.

And I think Vlad pointed out, he was on CNBC, I believe, last week or maybe it was -- no, it was this week. On June 1, we had our biggest day ever in equity trading that [Audio Gap]. We had periods where there was game stop activity and things like that. We also had our biggest day in the overnight session, which your last session, I believe, was around 24/7 trading. What tends to happen in the overnight session, which is really kind of interesting is, all the news of the weekend bunches up. And so Sunday nights are really big in overall equity trading. And so that [ had ] that on June 1.

Yes. We had a [ Blue Ocean ] CEO in here.

Yes, [ Brian ].

And [ Sunday night ] is big for them. I'm sure you're a big driver of that.

Yes. So it's been -- I would say, overall, the health of the retail customer is good. I wouldn't say that they're aggressively buying though, the way that they were during the periods where we had more sell-offs. So it's been a little more balanced, but we're seeing strong volumes.

Sure. And we had another panel here yesterday. It was an options panel, Matt Billings from Robinhood had joined. [ Keane ] was there. We talked about the pattern day trading rule, that's something that was removed today. It seems like there's a lot of people that are pretty [ bold ] up on it. How do you think that rule change is going to affect activity on Robinhood's customers?

Well, I think if you look at the average -- the average account size of Robinhood is $13,000. So Obviously, we were -- our customers, our [ $27.5 million ] were far more impacted by that rule than people at Schwab where I came from our [ TD Ameritrade ], where the account size is much bigger. So obviously, the impact it's going to be pretty monumental with existing customers. But I would also say we also saw a lot of customers leave Robinhood, because what happens is you get flagged and their reaction is, well, I can go to another broker and start fresh. And so they did, but they would -- we obviously know everybody that [ ACA ] it out. We know why they [ act ] it out because we flagged them and they would tell us on the way out. Listen, we love here, but we can't do the things that we need to do here. And so they all got a communication today across e-mail and every other method that we have to contact them and our existing customers. I think it's going to be really beneficial for the industry as a whole. Just to have that rule not in place anymore because, if now you're not going to unfairly impact people who are newer to investing smaller accounts. And let me tell you, it is not a new rule -- easy rule to explain to customers. We would struggle with that in a pretty big way.

Sure. So we had a -- Webull CEO up here yesterday, Anthony Danaher. One of the things he said was that he sees people -- they show up on Monday, they max out their trades and see until the next Monday. So it sounds like this is something that's going to make the customer base sticky, and there might be some migration of activity from other platforms back to Robinhood because that's kind of your core demographic.

Yes, if you like your experience at Robinhood and you were forced to -- force migration, you can migrate back. And we'll make sure that that's a good experience for them. And I think that will be positive. But I would also say there's another -- you just brought up a behavior. You have customers that are not making the right decision for the trade or for their portfolio because of this rule. That is the opposite of what we want to have happen.

All right. So one thing I want to talk about also, if I'm not mistaken, did Roth IRA went live today?

We did, yes.

Yes. So maybe just talk about the ramp there, how we should expect that rollout to happen? How much volume are you expecting to migrate from Kalshi to your own JV over the course of the next couple of months. Any color there?

Yes. And maybe I'll give a little bit about context in history, we started in the prediction markets and event contracts around the time of the election. We initially were doing this through [ forecast X ], which is Interactive Brokers. That's who we used to do the election and then we moved into other categories and now have both used [ forecast X ] and Kalshi. And along the way, we partnered with Susquehanna, the largest liquidity provider in most of these, we're probably the largest distribution channel with $27.5 million to create Roth IRA. The rationale behind it is we really want to replicate the model that exists today for equities options, crypto, where we have optionality to route to any venue that's creating products or experiences that are going to be good for our customers. We want to be able to have control over the economics in the case of Roth IRA, we're going to take some of the economics that we previously were giving to Kalshi and deliver them to our customers. And then we want to make sure the experience is good. So if we want to create a product, we're not dependent upon anybody else to create that. We have that ability. As far as moving the flow, we've announced that we'll move with the World Cup and some MLB games over there. But we're going to work sort of methodically to move some of that flow. I would say that we would move a significant portion of that flow, but we will also keep other routing partners.

And then just staying on the topic of Roth IRA. You have a DCM, you have a DCO, you have a SEF as well in there. I got to ask about perpetual future. You saw the CFTC approved the Bitcoin perpetual for Kalshi. How does Robinhood think about the ability to possibly launch perpetual futures through the Roth IRA JV? I know you have them overseas now through the [ bid standard stack ] position. So I mean, any thoughts on prediction markets and Robinhood customers [indiscernible].

Yes, that's okay. We already have them in Europe. So we are familiar already with them. And obviously, with the announcement of them coming here, I think there's an appetite for them. So we'll kind of -- we'll kind of use the same model like we have the ability to launch them on our own. We'll have the ability to launch them on their own, right? We get the permission and obviously be able to launch them through any of the other venues that will launch them as well. In terms of the impact, because we keep -- we're asked that question, how do we think that the pickup will be. There's a lot of interest in perps. And obviously, starting in crypto, which is where we are but you can imagine a world where they might expand in other categories.

Yes, I do want to ask the question. You don't have to answer if you don't want, but there's a thought that these perpetual futures could take a lot of attention at retail eyeballs away from other asset classes SPX [ 0D option volume ] is one of them. Your customer base is very active in SPX [ 0DD ]. Do you think perpetuals would be an attractive alternative to a customer when it comes to SPX options?

I don't know, like it's an interesting question. And every time that I've ever launched a new product, my CFO and finance team is always worried about cannibalization and behavior changes. Most of the time, they've been additive, but I think we have a pretty good mantra at Robinhood, which is, look, there's already categories which I can choose from today. [ SPY and ES ] option there's categories where I can already make choice. I think it's in our best interest just to give customers that choice and let them decide which one is going to be most appropriate for them. But I don't see [ 0 DTE ] options being replaced for some of the use cases that exist today. They are a pretty good hedge if I'm -- if I have 40% gains in the stock and I know earnings are coming out on a Thursday, and I just want to get insurance for that day.

That's a good hedge, sure. All right. Another hot topic, AI. You made a big announcement last week, a agentic trading, agentic credit card, [ in ] customers the ability to connect to an AI agent. Can you walk us through the vision there, who the target user is, how you think about the risk management guardrails? And how does this change the long-term competitive positioning of Robinhood?

Yes. I think we -- we're about a weekend. So obviously, the first users are going to be our most active and engaged, which is what we've seen. We're only in 1 asset class for an equities and obviously the credit card as well. We'll move into all the other asset classes pretty quickly, equities, options, crypto and [ ECS ]. And I think the vision there is it's -- you're going to have a segment of our user base and probably of the population that's going to be very comfortable using this. You -- we'll get to a point where that will probably get saturated and then we'll use that -- those learnings to be able to deliver something that's more useful for a larger portion of our customer base. So in other words, the people that are probably not as native to those technologies, we'll build it in such a way that they can utilize it for whatever they want. I mean they're going to be a large percentage of people who are not comfortable. Even though we've created in such a manner, it's a separate account, separate funding, you can dictate how much is going to be allocated in each trade. There's all kinds of controls both on the credit card side and on the trading side. But there will be a portion of -- probably a larger portion of the customer base that's going to use it to find opportunities, optimize portfolios, do scanning and -- screening and scanning or scripting that they probably wouldn't have been able to if they didn't have this capability.

Have you done any -- I mean, I know it's still early, but do you have any sense for...

How big it would take me?

Well, no, just maybe like on a per customer base. It's like a customer that's an active trader on your platform to deploying an AI agent. What's the magnitude of more trading that's done or less trading if you're there using an AI agent?

We're a weekend. So I think we're too early to say that. I just think it's going to get you to the trade quicker. I think that's what's going to be helpful.

Okay. All right. So I want to talk about asset accumulation in the wealth business. One of my favorite stats when it comes to Robinhood, you have 10% of adult Americans have a Robinhood account, you have less than 1% of total retail assets in the U.S. In the past, I think you've said that the wealth opportunity is about 3x what the self-connected opportunity is in terms of the TAM. How is the asset accumulation story progressing at Robinhood? And what is the trade PRM or a referral story look like in practice so far?

Every time I hear that stat, it excites me because I would want to be in a position where you have all the customers and they're starting to accumulate wealth, which is what we're in. And so this -- again, this number keeps changing and growing, which is a good thing, $124 trillion of wealth transfer, that's already underway. And we have a customer base that's in their mid-30s and they are starting to accumulate more wealth. I've been with brokers where they're building a lot of wealth decumulation tools. That's no fun. That's not really cool and a good place to be. So I just came from our Synergy conference in D.C., where we had about 500 advisers. And we rolled out a couple of things. So TradePMR is a company we acquired about a year ago, and we got together with 17 of the largest advisers, [ RIA ] firms in the country after acquisition and just said, hey, listen, if you had a blank canvas, you're all custodian. You're all likely have [ as ] your assets because custodied at either Schwab or Fidelity, those are the big ones, big -- 70% of the industry, I think. What would you change? Like give us everything you like about it, give us everything you don't like about it, and we have a blank canvas. So the culmination of all that was what we rolled out this week, which is a referral program that is going to match the recipients of all that wealth, the 27.5 million customers we have with the advisers that today do not have a relationship with a younger generation who's going to be receiving that. And he's also starting to accumulate that wealth in a way that is going to be -- we hear it loud and clear from our customers when we say, hey, listen, you have 25% of your wallet with us, why don't you have the other 75% here and they say, well, you don't have a solution for me. I'm not comfortable managing this amount of wealth. I'm comfortable managing a small percentage of it on my own. And so this is what we put together. And we did it in such a way that's going to be -- it's more appealing to the generation that is getting this wealth. I think the typical experience, if you walk in a branch of broker, I'm not going to name ABC is you talk to probably 5 people before you get to an adviser. The experience we created is I expressed an interest to have a referral to an adviser. I see a video of 3 advisers. If I like any one of them, I [ choose ] it, there's a meeting arranged, they meet by video conference. If I want to continue and pursue a relationship, I do so, and that account is open like that. And that's something they're not accustomed to in that space. Then when that account is open, I pull out my phone, and it's sitting there right next to my Robinhood account, and I can see the aggregate of all my investable assets or the holdings of that individual one. That -- we are now rolling that out to both the advisers and the customers. We're being a little careful about it because you don't have to have a big percentage of $27 million to run over those advisers. So the early rollout has been pretty good. The other thing that we announced there was the tools that are available for these advisers are pretty disparate and not well organized. We are including a lot of the capabilities we've built from Cortex and other AI capabilities into the application they use, the advisers use called Fusion, which I think is going to be extremely helpful. And everything we build will cascade into that as well.

All right. Also within the wealth vertical, you were selected as the broker and the initial trustee for the Trump Accounts, you're going to be launching on July 4, that role might not generate significant fees right away, but it puts you at the base of, I think, large potential future investors at the very start of their journey. So what are your expectations for near-term customer acquisition? And how do you think about the longer-term asset accumulation from that opportunity?

Well, there -- so far, there's -- we're the -- we were chosen as the trustee and custodian brokerage [ custodian ]. BNY is the physical agent. And of course, we did it with NDS, National Design Studio and Treasury. So far, I think there's 6 million sign-ups and there's the [ Michael Dell ] donation, which means, on top of many other people that are looking at donating or organization, states, companies, et cetera. There's going to be a big TAM, really big TAM there. I think the opportunity for us is, number one, it's pretty flattering to be part of the program because I think it's an amazing program and creating financial literacy amongst people that might not otherwise participate in capital markets is going to be transformative. But I also think the halo of everybody else in that ecosystem, we're really good at contribution flows with custodial accounts. We know how to send QR codes so that grandma or grandpa, mom or dad or company or state can make contributions on behalf of individuals. So it's one of the reasons we were chosen because we also have a really good track record of taking care of customers, half of our 27 million customers are brand new to the market. A lot of the people that are going to open these accounts, this will probably be their first experience with capital markets and brokerage firms. And we know how to do this. We know how to educate them, and we know how to make the experience really frictionless. But it's a big opportunity.

The contribution thing is interesting with the wealth transfer from the older generation. You got a portal there to some of that.

There's also a whole collection of companies that are all involved in this -- like think of companies like [ Baby List ], which if you have -- somebody is having a baby and you want to go to get a gift, we're there. Like you just click on it, then you make a contribution.

Yes. Interesting. All right. Maybe we're running a little low on time here. I want to talk about banking. You launched that in the fall, credit card wait list. I think it's over [ $3 million ] now. What does customer adoption looked like so far? And what percentage of Robinhood customers, I guess, new customers are adopting it, and where do you kind of expect existing customer adoption to go from here?

Well, I think it's pretty strong because it just adds to whole ecosystem. Vlad's vision has always been everything you do from a finance standpoint should be done within the Robinhood ecosystem. And this -- that part was kind of missing. I mean, we had a suite program. We had credit card, but now we have banking. I think we're -- at last, we had $2.5 billion in there, 800,000 people that have gotten the card. People love the card. It's really -- it's an amazing experience when you have it. So I think there's just so much more room to run there. And I want to say, I think 40% of the people that are opening these -- that are starting a banking relationship with us to direct deposit. If you ever want to ask us how we're doing as a company and how we're doing with engaging with customers, just look at how we're doing with deposits. That's probably the strongest indicator of how strong the relationship is with our customers.

Sure. All right. Robinhood has always been one of those platforms that has kind of seen where the puck is moving, whether it's crypto, prediction markets, I think, last year when we sat down at this conference, I don't even know if I asked you about prediction markets, but here we are now, and it's a $400 million run rate business for you, $300 million, $400 million.

[indiscernible].

What is it?

Never mind. I didn't say that. I think I got it. I got to get to script.

So if we look ahead to 12 months, what do you think the biggest trend in the brokerage industry is going to be? What are you going to be sitting up here talking about?

I actually think there's going to be an interesting collision of a lot of businesses. It already is happening. of the technologies that are underpinning crypto of [ ECs ] of like -- there's sort of a meld coming together of a lot of these things. And everything will be around the clock and on weekends, it better be it should be. So I think that's going to make for an even better experience for customers in the U.S. But I think if I go a couple of years out, I think it's going to make for a really great experience for customers around the globe. Because I think though, the unnatural walls that permit -- that prevent people from being able to invest in whatever market they want will eventually start to melt away at a quicker pace.

Great. All right, Steve, we're out of time. Thanks so much.

Thank you. Appreciate it.