Robinhood Strategies Could Be a Game-Changer for Young Investors

Key Points

• Robinhood stock has performed relatively well even as uncertainty grips the stock market.
• The company recently announced new services that could contribute significantly to its value long term.
• Robinhood Strategies marks the firm's foray into the robo-advisor market, which could grow by over 20% annually through 2030.

One stock that has fared comparatively well as tariffs have roiled many stocks is Robinhood Markets NASDAQ: HOOD.

Since President Trump’s Liberation Day announcement, HOOD stock is down just 5% as of the April 10 close. This compares to returns of down 7% and down 8.5% for the S&P 500 Index and the Financial Select Sector SPDR Fund NYSEARCA: XLF, respectively.

The financial services company continues to launch products to find new growth areas and diversify its revenue streams. This includes Robinhood's new wealth management and banking services, announced on March 27.

Investors are now asking themselves: Can Robinhood’s new offerings be significant growth drivers for the firm and add long-term value for its shareholders?

Why Robinhood Strategies Could Drive Significant Growth

At Robinhood’s The Lost City of Gold event, the company unveiled three new offerings: Robinhood Strategies, Robinhood Banking, and Robinhood Cortex.

Robinhood Strategies is essentially an investment advisor in your pocket. It helps create an investment portfolio for users based on their specific circumstances. Robinhood emphasizes that it “is more than just another robo advisor."

Robo advisors are algorithms that suggest a portfolio based on investor survey answers, often taking a "set-it-and-forget-it" approach.

In contrast, Robinhood Strategies provides active portfolio monitoring. It also offers a very low fee of 0.25% as a percentage of assets and caps this fee at $250 per year. This is massively less than what a human advisor might charge, with many taking an uncapped 1% fee based on assets under management. Lack of frequent communication is a reason why many clients leave their financial advisors, so it makes a lot of sense for Robinhood to enter this market.

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Robinhood Strategies also sends users messages about key market events and changes to their portfolios. Assuming this feature works well, this is a significant differentiator.

Human advisors often only work with clients who have a significant amount of money to invest. This means that robo advisors can capture a set of investors who are still growing their wealth. 

Robinhood Strategies' customer base is younger, with about 75% being millennials or Gen Z. These groups are often in the process of growing their assets.

Experts estimate that the robo advisory market is already worth over $8 billion and will increase to nearly $33 billion by 2030—representing a substantial growth rate of over 26% annually. Robinhood now has a significant opportunity to participate in this growth. Additionally, the differentiated features of Robinhood Strategies and its focus on younger users mean the company could exceed market growth rates.

Robinhood could substantially increase its wallet share through this product.

Robinhood's Expanding Ecosystem: Banking and Cortex

Robinhood is also trying to expand its offerings through its Robinhood Banking Platform, which will provide standard banking services like checking and savings accounts and estate planning and tax advice. This comes from a shift in the company’s median customer age from 31 years to 35 years.

Robinhood is likely targeting aging users who want more traditional services. Robinhood Banking enables users to open accounts for their children, which could be significant as customers grow their families. However, this is a less exciting development as analysts expect the retail banking market to grow by under 5% annually through 2029.

Robinhood’s new Cortex offering also ties in nicely, catering to active traders. It uses AI to help answer questions like “Why is this stock going up or down today?" Providing insight like this can be especially important during periods of higher market volatility, like today and can mean the difference between participating in or missing out on a market recovery.

Robinhood’s New Products Could Be Big for the Stock Long-Term

These new offerings look compelling. However, they may not significantly impact the stock in the short term.

While Robinhood won’t release Banking and Cortex until later this year, Robinhood Strategies will begin rolling out to all customers this month. Strong early adoption could positively impact share value.

Overall, these new offerings represent a big opportunity for Robinhood to grow its business and increase its wallet share. They could be highly additive to growth in the long term.