Robinhood Strategies’ More Human Approach to Automated Advice

In a recent interview, David Goldstone from the Robo Report spoke with Stephanie Guild, Chief Investment Officer at Robinhood, to discuss Robinhood Strategies, the company’s foray into automated investment management. Guild shared insights into the platform’s unique features, target audience, and future plans, offering a comprehensive overview of how Robinhood is approaching the robo-advisor space.

This interview has been edited for clarity and length

David Goldstone: How is Robinhood Strategies differentiated from other robo-advisor products on the market?

Stephanie Guild: It starts with my experiences, not just mine, but as a collective, our experiences and working as advisors. I worked with clients for a very long time at another firm.

I felt like there was a gap between the services you get from a robo-advisor and the kind of things that were considered when you worked with an advisor like I was. And so, we decided that we wanted to bring some of those elements into this, into this what we call digital advisory. I refuse to call it a robo, because we try to make it less robotic.

So the portfolios themselves differ, so there’s a $50 minimum, but once you get over $500, the portfolio will be a mix of ETFs and stocks. So that right there, just in the fact that we’re holding single names, is not very common in the field.

Secondly, we actively manage the portfolios. So we’re not trading them every day, but we are always thinking about what’s happening in the world, from a macro perspective, from a micro perspective, and what kind of portfolio do we think we’ll fare the best.

One core belief of ours, from my experiences and the experiences of my colleagues, is that our clients always just wanted to feel like their advisor had their back.

So we have something called insights where every time we make a change to the portfolio, anytime something big happens in the markets, and sometimes those two things happen at the same time. We’ll actually leave you a message in the dashboard of your account that is for you and the portfolio you’re in. I write them and then record them so you can listen to it or read it.

Another example is we leave them a message when we get the new IRS limitations.

Just ways to leave little messages to let clients know that we care about them and thinking about them.

David Goldstone: How do you think about financial planning from an automated perspective and where is that on your priority list as far as additional features to launch as you guys continue to evolve this?

Stephanie Guild: It’s important for us to provide financial planning, and we are working on the pieces of it. I think one of the things that comes with financial planning is having the capability to provide the things that you need if you’re going to plan. Like, you can come up with a plan, but what if you don’t have all the things you need to implement that plan?

I think strategies is a core piece of it, but also as a firm, offering more account types is going to be crucial too.

David Goldstone: Do you have thoughts on live advisors and possibly making live advisors available on the platform?

Stephanie Guild: I personally believe that nothing quite replaces at the very least having that like one-to-one conversation, human to human, to ask “am I doing the right things or is anything I forgot?”

I think technology can carry you farther than ever before. But I do think that it’s important to have access to one. So it’s top of mind for how we can connect those. Maybe it’s a little more technology to get you into a place where when you show up to talk to the human, there’s a lot of stuff that’s happened already. Analysis that’s happened behind the scenes.

David Goldstone: Are you attracting many non-Robinhood clients to Robinhood through strategies, or is it mostly strategies being adopted by existing clients elsewhere on the Robinhood platform?

Stephanie Guild: Because it’s a start, it’s more, the balance is toward existing Robinhood customers. But it’s a decent mix from an asset perspective, meaning that we’re not cannibalizing our own business.

David Goldstone: How’s it going so far? What’s the feedback you’re getting from clients?

Stephanie Guild: The feedback is generally positive. I think to me sometimes the best measure is on social media and Reddit threads, like what are people saying? The biggest positive feedback was actually on the insights. 60% of our customers have listened to at least one. 30% are listening to them regularly.

David Goldstone: What is your approach to investing? How do you arrive at your investment selections?

Stephanie Guild: I wonder about the old models of the long standing robo advisors and how is a five ETF, 60/40 portfolio doing this year?

We’re taking a multifaceted approach that takes the best of modern portfolio theory, the best of behavioral finance theory, and then applies our experience being in the markets to position our customers portfolios in the best light relative to what their goals and preferences are.

Stephanie Guild’s insights shed light on Robinhood Strategies’ unique approach to automated investing. By combining active management, personalized communication, and a modern platform, Robinhood aims to cater to a new generation of investors. The platform’s emphasis on accessibility and education, coupled with its innovative features, positions it as a compelling option in the evolving robo-advisor landscape.