Robinhood's New Robo Takes Cues From High-Touch Wealth Management

“I felt there was a gap in the market: You could either pay a human advisor or use a robo-advisor,” she says. “Robo-advisors strip away a lot of the good things about … having your money professionally managed.”

Robinhood Strategies, which has been rolling out to the firm’s Gold members, is expected to be widely available later in the spring, Guild says.

In the interview, she discusses the unit’s 0.25% annual fee, $50 minimum and specifics about its investment portfolios, to which customers can make certain changes. “It’s a two-way street,” Guild says.

Here are highlights of our conversation:

THINKADVISOR: What’s the genesis of Robinhood Strategies?

STEPHANIE GUILD: We wanted to build a product that didn’t exist and that provides a great service to our customers at a low cost.

It’s something I’ve been dreaming up for a while. I had a strong hand in what went into it.

Our customer base has grown with us. The average age is now 35. So [in view] of life changes, we wanted to be there for all the different parts of [our customers’] investment journey.

We’re sure we can deliver a service for people who want us to manage some part of their assets as well as continue to deliver a great [self-directed brokerage] service, which we’ve had for a long time now.

What’s the strategy behind Robinhood Strategies?

I felt there was a gap in the market: You could either pay a human advisor or use a [self-directed] robo-advisor.

Robo-advisors strip away a lot of the good things about getting advice and having your money professionally managed. They’re made to be super-cheap and accessible, and you can use them on the go.

But firms stopped remembering that there’s a human with emotions on the other side of that.

What are the implications?

My experience is that [clients] want to feel taken care of, that the people working with their money have their backs.

Something is left behind by giving somebody a plain vanilla portfolio and not necessarily much guidance beyond that.

How does Robinhood Strategies remedy that?

We put a lot of things into it that I took from my own experiences: I spent 11 years at J.P. Morgan Private Bank serving the wealthiest people in the country.

Prior to that, I spent 10 years at J.P. Morgan Asset Management, a good portion of that in the U.S. equities business.

So I thought: What are those things that mattered a lot beyond portfolio management, and how can we use technology to deliver them to our customer base?

Who is Robinhood Strategies’ target client?

Anybody who’s looking for inexpensive, convenient wealth management and wants more than what a current robo-advisor can give them.

This is for anyone who’s looking for a solution that provides some explanations, insight and wants all the important things that sometimes you only get with a human advisor [relationship] — and that can even be complementary to an overall holistic investment advisor experience.

What are examples of how Robinhood Strategies is more than a robo-advisor?

We actively manage the portfolios. Instead of just buying five or six ETFs and rebalancing on a quarterly basis, we’re actually thinking about the [changing] environment we’re in.

We’re not trying to trade every single day, but we’re [strongly] positioning the portfolios relative to the current environment, where you have a president who potentially is materially changing the future of global trade and the U.S. economy.

We’re really trying to see how we can help protect on the downside but still participate on the upside.

Please talk about the nature of the portfolios.

We run the gamut. Even in the most aggressive portfolios, we have a taxable allocation to Treasury bills.

We’ve also been very specific about making sure that we have a diversified allocation across international as well as the U.S. and also within the U.S. allocation.

We have individual stocks in the portfolios that are actively watched and managed.

How much input can clients provide about choosing stocks they want to invest in, or is that all up to Robinhood Strategies?

It’s a two-way street. You can change the goal of your portfolio any time. You can move it down to “Preserve” or up to “Growth.” You can change your time horizon. You can change your risk tolerance and see how it could change your portfolio. You can restrict individual stocks at any time.

What else distinguishes the service besides active management?

We provide “Insights.” Think about what’s happening in the market. In the weeks before, when there were some really big down days, we were able to very quickly deliver personalized, customized messages to our customer base.

We told them that “it’s very rare when the markets go down 4% to 6% in one day, and here’s what’s happening. Here’s how we’ve been positioned, and here’s what we’re looking for next.”

That’s very different from what robo-advisors do. Isn’t it?

This is the kind of thing I did when I was working with clients directly as an advisor in terms of delivering reassurances and giving them an idea of what we might be doing in the portfolio to protect [the assets] — or to take advantage of [market downturns].

If you’re providing reassurances, the client feels like the person who’s looking after their money is there answering their questions before they even have a chance to ask them.

This is a way of helping people stay invested for the long term.