The King of Retail Brokers: Robin’s US$40 billion in “robbing the rich and helping the poor”

The King of Retail Brokers: Robin's US$40 billion in "robbing the rich and helping the poor"

This article is from the WeChat public account : New Global Asset Allocation (ID: SmartGAA) , author: Xu Yang, the title picture is from Robinhood

If you simply look at the following exquisite illustrations, what do you think the company that creates these illustrations does?

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"


Is it a comic company? Is it an advertising company? Or a game company?

No no no, neither. This is someone’s illustration in the 400-page long and boring IPO prospectus. This “people” is the king of American Internet retail brokerages, Robinhood (RH, Robin Man) , who has won the world with zero commission, ease of use and pure online services .

Robinxia publicly filed a prospectus with the US SEC on July 1, 2021, seeking an IPO. Its disclosed historical financing totaled nearly 6 billion U.S. dollars, and the potential IPO valuation is about 40 billion U.S. dollars. As of 2021Q1, the total number of customers depositing funds exceeds 18 million.

I have written two articles about Robin Man, “How does a zero-commission broker rob your wallet” and “$65 million to punish a zero-commission broker Robin Man” , discussing how Robin Man is under his zero-commission coat It makes money; and behind the zero commission, the hidden costs that are ignored by users; and the relevant requirements of the United States supervision on the quality of execution of brokers.

From my perspective as an asset trustee in traditional finance, customer experience is really important, but if you don’t truly fulfill the principal’s responsibilities, do not make appropriate disclosures and guidelines, and do not put customer interests first, you will always have to pay back in the future. of. The United States Securities Regulatory Commission, the fact that Robin Man’s gimmick of free-commission transactions is based on the fact that the quality of customer transactions is degraded has sounded the bell for all consumers.

There are also many criticisms of Robin on the Internet. The prophet of Omaha we are familiar with, Buffett, and his good friend Munger, also publicly commented on Robin:

… Robinhood has become a very important part of the casino…

…This is a casino disguised as a respected company, and it tells people that they will not pay commissions, but in fact the commissions are just disguised in the transaction…

…There are still many educated and honest people supporting it. It’s really bad… This is a big mistake. We don’t want to make money by selling things that are harmful to people…

With more and more investigations, regulatory fines and litigation settlements, it is natural that they are indispensable, just check:

  • On July 1, 2021, the U.S. Financial Supervisory Authority fined 70 million U.S. dollars
  • On December 7, 2020, the US Securities and Exchange Commission fined 65 million US dollars
  • Unknown date in 2020, payment of 26.6 million US dollars in litigation settlement fees
  • On December 19, 2019, the U.S. Financial Supervisory Authority fined 1.5 million U.S. dollars

Many fans of Robin before came to say that I was Luo Hei of Robin, maliciously belittling my peers. I’m sorry, I’m just an ordinary worker in the securities and fund industry. This industry is very busy. As long as it is normal-minded, I don’t have any idleness to criticize it. Of course, the forest is so big, there are also more vulgar people who like to deliberately discredit. The amount of reading of my article is not worth making me spend more than ten hours of serious research to deliberately “black” a company with a valuation of tens of billions.

Today I am writing this article, not to talk about Robin Man’s being criticized, but from the perspective of Internet products, Internet spirit, and financial data, I want to talk about Robin Man’s worth of learning and talk about me. Why do you admire Robin?

Tao: Complete financial democratization

Our mission is to democratize finance for all – RH

If you were the founder of a company, if you had the conditions, how much time, manpower, and material resources would you be willing to spend on the design of the 400-page IPO prospectus—many people think that ordinary investors would hardly read it. You may not even be able to search.

Look, the company profile design on other people’s prospectus:

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"RH,S-1,SEC

Look, the founder’s letter design on other people’s prospectus:

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"


Look, the user reputation design on other people’s prospectus:

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"


Look, the chapter title design on other people’s prospectus:

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"


Look, the data display design on other people’s prospectus:

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"


Look, the product and service design in other people’s prospectus:

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"


Robin Man, in the nearly 400-page prospectus, used 49 exquisite illustrations (yes, I right-clicked and copied them one by one, and also arranged the layout) . Just compare the numbers, the recent IPO Didi used 28 cards. Most of the materials used by Robin Man should be the usual product design drawings. The overall time spent should not be too long. A mature design team can handle it in minutes.

The point is, how many companies would think of doing this? How many companies would be willing to do this? How many companies will truly integrate the design drawings into the overall prospectus from the heart and conscientiously, even the detailed design of chapter titles?

In ordinary company

A: This IPO prospectus is so long, the SEC’s default layout is so ugly and ugly, and there are so many words and data that look like a book? ! Our customers and potential users can understand a hammer?

B: Your tortoise son takes care of him with a hammer? No one looks at this stuff anyway, it’s just for disclosure, and everyone does it.

Robin Man

A: This IPO prospectus is so long, the SEC’s default layout is so ugly and ugly, and there are so many words and data that look like a book? ! Our customers and potential users can understand a hammer?

B: It makes sense. We can’t let go of any opportunity for ordinary people to better understand our company, arrange and start!

I am not an investment banking business. I have probably read about 50 IPO prospectuses seriously. From my limited data, I have never seen any company that uses so many exquisite and very design-conscious companies. illustration.

From my personal experience, many outstanding American companies across the ocean really believe in the company’s culture and vision. These thoughtful illustrations in the Robin Man prospectus have made the cold, densely packed text and numbers humane and easy to understand. This is because the potential customers in Robin’s vision are super novices who have never done a stock transaction but are eager to accumulate wealth.

In order to allow customers to better understand the company’s vision and products, a good company will not miss any opportunity. Even in a tedious prospectus that is considered to be no one to read, it will pursue the ultimate experience. Will seriously implant the company’s vision in order to gain a high degree of user recognition.

However, there are still some companies, I think it is the opposite: in my bones, I don’t really believe in culture and vision, but feel that culture and vision are good marketing tools and company blood. You can shout and fight at will.

As for Robin’s vision of “complete financial democratization”, I can deeply feel from his prospectus: He is really doing this! The design of the prospectus is just a small beam of light from Robin’s vision, and Robin’s App experience, closed-loop architecture, product matrix and services are the core of its competitiveness.

After enjoying the illustrations on the Robin Man prospectus, I also have a small question: Is the design of a company valued at 40 billion US dollars so lazy? Why are the K-line charts of the stocks and digital currencies on display exactly the same…For different trading varieties, please change it?

Heaven and Earth: Opportunities are always reserved for those who are prepared

Robin Man pointed out two major trends in the prospectus:

1. Technology is changing customer expectations.

2. There are more and more participants in the financial market, and the rise of financial technology companies.

The stock market is one of the largest sources of wealth creation in the world, but there are still many individuals and families who have not enjoyed the benefits of wealth creation brought by the stock market, and many people have not received the financial services they deserve. According to the Harris poll conducted in 2020, nearly two-thirds of Americans would consider buying or using financial products through the platform of technology companies, rather than traditional financial service providers, while in the US between 18 and 34 years old. Among the people, the number of people who agree with such views increased to 81%.

It is precisely relying on the irreversible trend of inclusive finance and technology finance that Robinxia used the gimmick of zero commission to quickly cut into the stock market, the never-ending wealth market. As a rising star, being able to stand out from the crowd in the highly competitive American market must be unique.

Robin has a differentiated system:

1. Intuitive, elegant and creative product design.

2. Able to redefine the brand of the entire industry.

3. Financial services with Internet scale effect.

4. Vertically integrated closed-loop platform.

5. Innovative and compelling business model.

6. A passionate and experienced team led by the founder.

Such unabashed self-confidence, let’s look at the business data:

1. 17.7 million monthly active users; 18 million cumulative users; 5.7 million new users will be added in the first quarter of 2021.

2. Total client assets are US$81 billion; the average account amount is US$4,500.

3. In 15-21 years, more than 50% of Robin’s new customers were involved in stock investment for the first time.

4. Half of Americans between the ages of 18 and 44 know Robin Man brokerage.

5. Marketing expenses will be paid back to the current period of 5 months.

6. The average account churn rate is 15%.

7. More than 40% of transactions are odd lot transactions.

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"

These amazing customer data and operational results are based on a 100% Internet-based product and service system.

Investment-related products:

1. Zero commission trading of US stocks, ETFs, and options.

2. Digital currency transactions.

3. Odd stock trading, for example, you can spend $1 to hold 0.0001 shares of a stock with a price of 1,000 yuan.

4. Regular or fixed investment, dividends are automatically reinvested.

5. There is no threshold for subscription of new shares.

6. Cash management, and customers can apply for Robin Man’s co-branded credit card, and can make purchases without withdrawing money.

7. “Golden” Robin: It provides payment functions such as instant deposit of gold, depth of the secondary market and leveraged trading.

Services related to education and information:

1. Robinhood Snacks ( Robinhood Snacks , 32 million subscribers) : Daily and weekly releases of selected summaries of business news stories. There are text, audio, video, podcasts and newsletters.

2. Robinhood Learn (Robin Hood, with more than 7 million views) : A collection of more than 650 articles, including guides, special tutorials, and a very easy-to-use financial dictionary.

3. Newsfeeds (news feed, 6.4 million users) : Free high-quality news from websites including Barron’s Weekly, Reuters, and Wall Street Journal.

4. Robinhood Lists (Tracking by Robinhood , 9.5 million users) : Create custom watch lists to monitor the movements of stocks, ETFs, or digital currencies that you hold or are interested in.

The Fed opened the giant floodgate of unlimited quantitative easing (QE) in March 2020 , releasing several trillions of liquidity; the U.S. Treasury Department also sprinkled a lot of green US dollar bills under the guidance of the two presidents. The young people who had the bills in hand, in a socially isolated environment, were stimulated by going through Wall Street, opening accounts one after another and rushing to the market.

Robin Man added 5.7 million new users in Q1 of 2021, an increase of 150% year-on-year. The increase in one quarter exceeded his total number of customers at the end of 2019. The number of new customers in March 2020-2021 will account for 45% of the historical cumulative number of customers.

With such a huge increase, although there have been one or two major problems in the transaction, the user’s evaluation of Robin Man has not dropped significantly, and the Apple App score is still 4 stars. This kind of underlying structure, product and service system that is capable of fighting well and resisting does not only come from the design and practice of illustrations, but from the continuous construction and polishing for so many years.

It is quite interesting to compare the core data with the leading Internet brokers around us. I use the data of Q1 in 2021. Q1 can be regarded as the highlight moment of overseas top Internet brokers. The latest data of Robin Man is also as of Q1.

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"

1. The long-tail users of Robin Man’s service are really too long-tailed. They grow to 100 million digits after the decimal point: 18 million users, 4,500 US dollars per capita, which is about 30,000 RMB. This is still the data after the Fed’s large-scale release of water, Americans took money at home, lay flat and held the ticket online to open the hack. Before the large-scale release, the average per capita should be around US$2,500.

2. 80% of Robin’s total income comes from trading-related activities. This ratio is very high, and other benchmark companies are around 50%. The higher the proportion of income related to transactions, the faster the income tends to fall when the market fluctuates sharply downwards.

3. The proportion of Robin’s customers using leverage, accounting for about 6.5% of the total assets of customers. The estimated ratio is around 3%~4%, mainly because its customers’ net worth is low, and customers use leverage, in addition to paying 3~5 times higher leverage interest than the average of the industry, there is also a fixed monthly fee.

4. Interactive Brokers is also the most worthy overseas target for comprehensive Internet brokers: the average customer asset is 250,000 US dollars, which is hundreds of blocks away from other companies. Even excluding the factor of larger institutional accounts but fewer accounts, the average asset of a retail account is around US$150,000, which is at the level of CICC.

5. Compared with Tiger Securities, Futu Securities and Oriental Fortune, based on Robin’s super long-tail customer acquisition and service system, up to 17.7 million monthly active and 6 million average daily effective trading volume (DARTs, Estimate) , if calculated according to the higher 15-20 times market-sales ratio, Robin Man’s $40 billion valuation obviously needs to be supported by higher performance growth expectations.

According to the disclosure, Robin Man’s interest and fee income is very low, 70~80% of the income source is the sales order flow “Payment for Order Flow (PFOF) “, that is, in my previous two articles, I explained their business in detail. Mode-Under the coat of zero commission, make money by selling customer orders to high-frequency market makers. To put it simply, after the brokerage has assembled your orders, they are packaged and sold to high-frequency market makers at a certain price, who will match and execute them.

Revenue is so dependent on the flow of transactions and selling orders, Robinxia also had to remind: “The application of large-scale programmatic trading, as well as other technological advancements and regulatory changes in the market, may continue to tighten trading spreads (the flow of selling orders). Revenue space) , which may lead to a decrease in the sales order flow revenue we receive from market makers… Changes in the relationship with market makers, any regulation or ban on sales order flow and similar practices may lead to a decline in profitability, Increased compliance costs and increased negative public image.”

In the practice of selling orders, there are triple uncertainties in the market, partners and supervision, and with more and more public doubts, how Robin Man will create a diversity of income sources in the future, I also move a small stool. Wait and see.

General and method: creating addictive products

Many people should have heard of The Hooked Model (addiction model) , which comes from Nir Eyal’s book ” Hooked ” . This book reveals a lot of Internet products that make users addicted and form in-depth usage habits, as well as the basic design principles behind the services. All the consumer-grade products of the first-line Internet giants that you can name and are well aware of all kinds of addiction.

Generally speaking, addictive products use 4 steps to design a series of seduce, so that you can have a habit of using it that you can’t stop, and become a repeat customer of the product, or even the product itself.

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"

Trigger (the Trigger) : You can ignite a spark of interest, wits like temptation, whether visual or text must be no way that you do not scratch the itch.

Action (Action) : high, no brain and effortless ease of use, increase your urge to click, so that you unknowingly caught in a preset path.

Variable bonus (Variable Reward) : You must meet the initial desires, but leave room for fantasy and inspire you dopamine, make you ecstatic.

Investment (Investment) : must let you put more than just “money”, but the data, effort, social identity, and more importantly, the “time” to increase the probability of being ignited next time.

Robin’s product, from the perspective of making customers addicted and allowing customers to invest in accordance with the design path, is an attractive deep loop and a small motor that generates desire. Robin’s most famous and most criticized design recently is a variety of colorful celebration animations that pop up when customers complete transactions or complete App preset tasks (also to promote customers to make deposits and investment transactions) .

The King of Retail Brokers: Robin's US billion in "robbing the rich and helping the poor"

Due to regulatory pressure, Robin Man announced in March 2021 that he would no longer use colorful color bar animations, but changed to more design-oriented three-dimensional elements. Of course, the change of color bar animation is just a scapegoat. If Roche’s black hole-like experience attraction can be achieved only by color bars, wouldn’t it be too easy? It’s not too easy to be UX/UI designers all over the world. Where to put it?

Robin’s strength is not only serious about the details and design in the prospectus, but also not only good-looking and attractive App design, but also the vision of “complete financial democratization” in one place. , Extremely focused and earnestly pursuing “minimalist” and “pleasant” products and user experience, without missing almost any detail. This is a very good interpretation of the Internet spirit of “extreme pursuit of user experience” and “extreme respect for talents”.

Looking back, when Robin Man was founded in 2012, the Iphone was out to the 5th generation. The average internet speed in the United States was around 8Mps. What’s more, the average speed of opening an account at a US brokerage was on a weekly basis. Many of us are now familiar with it. All robo-advisor companies are just getting started. Although the market opportunity is great, the underlying structure of the securities industry is very old and there are pits everywhere.

A friend of mine is a very, very early investor in Robin Man. I still asked him very unconventionally, why he is Vlad and Baiju (the 2 founders of Robin Man) . We talked for a long time, from first meeting Vlad and Baiju, to their entrepreneurial experience, to their founding of Robin, and then all the way. Looking through the rearview mirror, successful people always have countless reasons for success. But at this stage, what I can most empathize with is the following paragraph.

The most prominent feature is their non-stop. They can always find all kinds of ways to get rid of all kinds of difficulties and get stuff done without fear . At the same time, they are also very likable-capable but not assholes, not bragging, and have a sense of humor. Someone of them said early on: “We don’t like to say’no’, we like to say:’Okay, if you can xxx, you can do xxx’. With the’Ok, if you can xxx, you can do xxx’, no matter if’ How big it is, it means that it is just a question of creativity and execution.”

Many people may not know that Robin’s App, in 2015, became the first financial technology product in history to win the Apple Design Award. The founders knew exactly what they wanted from the beginning: a clean interface with only a few numbers and charts. In the financial technology environment at that time, it was extremely difficult to do subtraction. But Robin did not try to become Charles Schwab (Charles Schwab) , but wanted to become the “next generation” Charles Schwab.

Robin’s customer reviews listed in the prospectus made me feel no sense of distance: connection, equality, friendliness, possibility, a better future, control, eye-opening, and financial security. Robin Man also listed the company’s 4 values ​​in the prospectus.

First Safety (safety first) : security-first platform reliability above all else.

Participation Is Power ( Participation Is Power ) : Treat customers equally, and those with more money will not get better service.

The Customer Focus Radical (thoroughly focus on the customer) : Robin Xia exists to make customer satisfaction.

Thinking Principles-First (First Principles thinking) : dare to be for high stakes, and challenge the status quo; art, science and pure mathematics is the cornerstone.

Of course, Robin Man is a company that exists for the purpose of profit. It must have the temperament and demeanor of a big factory inside and out. The values, culture and vision of the Virgin are indispensable, as well as the real business way. For example, Robin Man spent 30 million U.S. dollars in cash, bonuses, and option awards in 2020 to set up the post of Chief Legal Officer (Chief Legal Officer) and hired Daniel Gallagher. Who is this buddy? He was a commissioner of the US Securities and Exchange Commission appointed by Obama when he was in office, and he was mainly responsible for the structural issues of the asset market at that time.

Write at the end

In Robin’s history, due to improper disclosure, customer induction, transaction problems, settlement fees and US regulatory penalties, a total of almost 150 million U.S. dollars. Serving so many long-tail users, in the US regulatory environment where the “Fish Farming Mind Act” is the world’s largest, they have only been fined a mere US$150 million.

I thought, if you give me 150 million dollars today, can I build a company of the same level as Robin Man in 5 years? Will the transaction structure and service system be able to withstand the newly added 5.7 million users in 3 months?

This $150 million is 150 million details of repairs and improvements, and 150 million opportunities to verify customer loyalty. Not everyone can afford it. Every time Robin is punished, he is to obtain first-hand feedback, friction and friction on the boundary between “investment gamification” and “compliance with financial supervision”, making this boundary clearer.

In the Internet era, there must be extreme customer empathy, “being good to users”, which is a simple 4 words, but it contains pure company vision, user-oriented product details, thorough customer service, and a high degree of organization An intelligent talent system. Many times, do you need to stop and think: What is the pursuit of the ultimate user experience? What is extreme respect for talents?

The ultimate user experience is not only a requirement for the product, but from a large perspective, it is the overall requirement for the brand, service and operating system represented by the product. The extreme respect of talents is not only the respect of superiors and subordinates, but more importantly, it is to create a culture where “people” and “things” are extremely respected, and all “people” highly respect the “things” they do.

Thirty-two years ago, Charles Schwab opened the telephone transaction service. Users no longer need to fill in complex transaction receipts, which greatly reduces the threshold for securities transactions; 23 years ago, Interactive Brokers began to provide retail users with transaction services that can only be enjoyed by institutions. The programmatic transaction has been brought to the public. Standing today, American brokerage giants have basically fully Internet-enabled products and services. The full zero commission has also brought about tremendous changes in the market structure of the US securities industry.

Mediocre, be careful, go to school, think carefully. Only by relying on talents who have worked hard and honed seriously, coupled with product experience and service system, will it be possible to catch up in the next five years. Don’t forget the pure original intention when you first learn from barbarians and then develop skills.

This article comes from WeChat public account : New Global Asset Allocation (ID: SmartGAA) , author: Xu Yang

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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