Webull vs. Robinhood – Which is The Better Brokerage?

One of the transformative events of the last few years has been the convergence of finance and technology. One of the ways that this transformation has played out is the emergence of stock trading apps that allow traders to bypass traditional brokerage firms and buy or sell stocks from their mobile devices.

These stock trading apps were also the catalyst for zero-commission trading. Now younger investors had the ability to avoid the two largest obstacles that were keeping them out of the market. There was no need for a middleman and they could trade without commissions.

The novel coronavirus has brought many of these mobile trading apps to the forefront. Almost every week we hear the phrase “Robinhood traders” to explain price movement on speculative stocks. And Robinhood is perhaps the most well-known of the mobile stock trading apps.

However, Robinhood is not a monopoly. And another stock trading app that has been garnering attention is Webull. On the surface, there isn’t an obvious difference between the two services. Both offer free trading for stocks and exchange-traded funds (ETFs). Both offer the ability to trade options and both offer the ability for traders to engage in margin trading.

But when you take a closer look, there are some differences that investors should be aware of before they decide which platform is right for them. And the purpose of this article is to do just that. We’ll take a look at the two services and show you how they’re similar and how they’re different so you can make an informed decision.

Understanding Webull and Robinhood

Both Webull and Robinhood are mobile app-based brokerage platforms. Users can access both apps from a desktop computer as well as an Android or iOS mobile device. Both platforms offer free trading for over 5,000 stocks and exchange-traded funds (ETFs). As of March 2020, Webull offers option trading which was previously unique to Robinhood. In addition, both platforms allow trades to engage in margin trading.

One question that any investor should ask is if these apps are regulated. The answer is yes. Both Robinhood and Webull are regulated by the United States Securities & Exchange Commission (SEC) as well as the Financial Industry Regulatory Authority (FINRA).  Assets up to $500,000 (including up to $250,000 for cash in your account) are protected by the Securities Investor Protection Corporation (SIPC).  

This regulation does come at a small price. Both Robinhood and Webull are required to apply SEC and FINRA fees to trades. These fees are standard throughout the industry. There’s no reason to shop around looking for a way to get them lower or canceled altogether.

And both services do a good job of protecting user accounts by providing a two-step authorization process when users log in.

As I noted above, there are a lot of similarities between the two platforms, but there are some differences. Some of these are subtle (and perhaps temporary). But others have more to do with the kind of trader each platform is attempting to engage with.

To help you understand these differences, we’ll go into detail about each platform individually.

Robinhood – Easy to Use and Get Started

The one word that you would use to describe Robinhood is easy. Since launching in 2016, the platform has drawn rave reviews for its easy-to-use interface. Yes, substance should matter more than style. But a generation that is used to special effects and other attention-getting techniques need to be engaged. Robinhood does that while allowing zero commission and zero fees on trades. Cash accounts require no minimum balance.

Robinhood embraced options trading from its earliest days. And more recently, the platform allows cryptocurrency trading. This gives millennial investors a range of trading options that they seem to enjoy. In fact, at least for now, Robinhood is an advantage over Webull for those who want to trade cryptocurrency and equities from the same platform.

Another advantage of Robinhood is that traders can buy and sell fractional shares. This means that instead of having to pay over $3,000 to buy a single share of Amazon (NASDAQ:AMZN), investors can buy one-tenth of a share for $300. The ability to buy fractional shares should dispel any myths that Robinhood investors are only buying and selling low-priced stocks.

Yet another way that Robinhood is distinct from Webull is in its margin rate structure, particularly when it comes to those who are trading smaller amounts. The platform charges a flat $5 monthly fee for margin accounts up to $1,000. After that the fee is 5% no matter the size of the account.

However, margin trading is not available in the base Robinhood package. To execute margin trades, users must upgrade to the Robinhood Gold package for a $5 monthly fee. While not an odious fee by any means, it is something to be aware of. A $2,000 minimum is also required to trade on margin. It appears you can trade with leverage. For example if you have $2,000 in your margin account, you can borrow an additional $2,000 to execute a trade.

Robinhood is considered to be easy to set up and start trading making it easy (critics might say too easy) for beginning traders to get started. However, the app lacks many advanced features that more experienced traders are looking for.

Webull – Easy to Use With More Robust Educational Tools

When you understand that Webull started as a research platform, you’ll more easily understand how it is distinct from Robinhood. Whether Webull ever intended to become a trading platform or just leaned into where the industry was going doesn’t matter. The simple fact is, Webull started off as a site for investors to consolidate their portfolios. Today it has expanded to become a zero-commission trading source.

Webull is available as both a desktop app and a mobile web-based app. Once a user establishes an account they have access to both versions. Consumers can choose a cash account or one of two margin accounts. One margin account provides unlimited day trading whereas the other offers limited day trading. For users to have a margin account, they must have $2,000 in their account. A feature of margin accounts that many traders will appreciate is the ability to margin short sales with 4x leverage on trades made the same day and 2x the amount for trades held overnight.

Webull’s margin rate fee structure is different from Robinhood. In the case of Webull, the company uses a sliding scale that gets lower the larger your account balance.

Dollar Range
$0 - $25,000	6.99%
$25,000 - $100,000	6.49%
$100,000 - $250,000	5.99%
$250,000 - $500,000	5.49%
$500,000 - $1,000,000	4.99%
$1,000,000 - $3,000,000	4.49%
>$3,000,000	3.99%

 

There are a few other key differences in services that Webull offers. The first is short selling. This is one of the riskiest forms of investment because, theoretically, there is no limit as to how much an investor can lose. In a short sale (called going short or taking a short position) a trader borrows a stock, sells it, then buys the stock back to return it to the lender.

The trader is hoping that the stock will drop in price after they sell it. If it does, they can buy it back at the lower price, return it to the lender and pocket the profit. Of course, if the stock rises after the trader sells it, they may have to sell other equities to cover their short position. It’s a sophisticated form of trading and definitely not for risk-averse traders.

However, another feature that Webull offers that is extremely safe is its paper trading feature. This is a “demo mode” that allows traders to simulate trades without putting capital at risk. This is a valuable feature because it can help traders learn about how different actions and strategies can affect their investments before they put their own money at risk.

The third key feature that separates Webull from Robinhood is the ability to setup a free individual retirement account (IRA).

At this time, Webull does not offer cryptocurrency trading. But the company says it may soon.

Research is the Key

The biggest distinction between the two sites comes down to tools and analytics. This goes beyond a look and feel discussion. Webull offers significantly more educational tools and analysis tools. This is great for more experienced investors who won’t want to toggle between different apps to get information and insights.

Think of it like two fitness apps. The person who is simply looking to lose a few pounds may choose an app that counts steps, logs miles, calories burned, etc. However, the fitness enthusiast may want more detailed performance metrics to fine tune their workout routine based on a number of factors.

That analogy can help you understand the difference between Webull and Robinhood. The good news is traders aren’t paying anything to have access to all that research and analytics. Webull’s analytics tools include:

• Cash flow reports
• Income statements and balance sheets
• Streaming news
• Morningstar reports

However, for the novice investor, or the investor who is only interested in trading part-time, the setup could look a bit overwhelming. When you’re on Webull, it looks like you're on the site of a large brokerage firm, and that can be intimidating.

Customer Support Is a Little Lacking

For apps that are based on a technology platform, I have to admit they are both a little behind the curve when it comes to customer service. Robinhood does a better job of providing educational (how to) tools on its platform. But in both cases, the 24/7 telephone support does not always get you to a live person. And neither provides a live chat feature. To get a hold of customer support requires you to send an email.

Which Brokerage is Better?

If you’ve read this far, then you know what my answer will be. It depends on your investment style and also what you already know about investing. Robinhood may be the better choice for the part-time trader who is looking for an easy-to-use interface, but are not looking for anything but the most remedial of education.

Webull offers more robust research tools which may be overwhelming for the novice trader. However, for more knowledgeable traders, Webull may offer tools and services that they need. 

There is no simple answer as to which platform can provide the best performance. That will always depend on variables such as your investment style and, like any investment, a healthy amount of luck. But with both platforms, the fees are not outrageous and what you get for free should be sufficient.