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Discount Brokerage Weekly Roundup – September 14, 2020

If 2020 has any common theme, it’s that the year has been filled with things you never expected to write or say in a sentence. For example, tech giant Oracle decides to (seriously) buy social media platform TikTok’s US operations. Alas, here we are. Ironically, what has made TikTok culturally relevant has been its ability to reach users with short bursts of content, which is exactly what at least one online brokerage is also hoping to do.

In this week’s Roundup, we put the spotlight directly on one US online brokerage that announced they’re launching a video series and unpack what that means for the online brokerage competitors in the US and here in Canada. From there, we cap off this edition of the Roundup with comments from DIY investors on Twitter and in the investing forums.

Lights, Camera, Snacktion: Robinhood Takes Financial Content to Video

Staying on top of what’s happening in the world of finance is both easier and harder than it’s ever been before for DIY investors. There is no shortage of “news” out there about what’s happening in the markets, but for many self-directed investors, sorting through it all can be daunting.

Cue Robinhood and their latest announcement this past week of the launch of their first video series based on their ultra-successful Robinhood Snacks podcast.

While an online brokerage launching a video series may not seem like a big deal, in this case, the tweet referencing the launch of the series portends what the larger vision for Robinhood’s content ambitions are, and, frankly, now when Robinhood does something, the rest of the online brokerage world is wise to pay close attention.

Starting first with their comment “The ultimate goal is to make finance as culturally relevant as music, sports and the arts.”

This is an incredible throwdown: Bringing the conversation about money and investing into the mainstream in a way that puts it on par with everyday experiences is very ambitious. That said, so too was the prospect of a financially sustainable online brokerage offering zero-dollar commissions.

Given all the content (and not just financial content, either) that’s currently out there, the topic of money isn’t one that generally excites people, nor is there anything that stands out as best in class. If their podcast, which was the result of an acquisition of the popular show Market Snacks in March of 2019, is any indication, Robinhood has clearly struck a chord with younger investors by creating “digestible” news. Their new video format is launching with two updates a week (for now) and capping the show at about three minutes in length, which is just long enough to get viewers in today’s attention-challenged day and age to stick around.

Importantly, the format of Robinhood’s new YouTube/Instagram show will be distinct from the predictable business reporting that is typical of most stock market–centric content. It likely will not talk about the swings of the market so much as it will mirror the format of the podcast, which chooses to focus on stories about public companies.

What is potentially most fascinating about this new venture is being able to watch it grow from the ground level. At the time of publication, the current number of subscribers to the Robinhood YouTube channel is 1.85K. Here are some comparable figures at competing online brokerage YouTube channels:

  • TD Ameritrade – 109K subscribers
  • E*Trade – 49K subscribers
  • Charles Schwab – 43K subscribers
  • Interactive Brokers – 40.9K subscribers

Despite what seems like it could be a hard-fought climb in subscribers on YouTube, the numbers from the newsletter and podcast suggest an accelerated growth for Robinhood on YouTube (without having to pay for advertising). Their podcast has 1.9M+ monthly active listeners, and there are 20M+ subscribers to their newsletter, both of which could easily help boost subscribership to the YouTube channel in a hurry. A quick search of other online brokerages with podcasts turned up only TD Ameritrade, which had “market data”–style reporting.

With no real competition on podcasts, Robinhood has gained mindshare with a huge audience, which no other online brokerage can replicate overnight. Moreover, reading through the Instagram comments on the announcement of the video version of the Robinhood Snacks podcasts revealed just how enthusiastic the “Snackers” (present company included) are with the product.

What does all of this mean for online brokerages?

With significant consolidation taking place in the online brokerage industry in the United States, the number of unique players has narrowed. Even with the scale of those new enterprises, Robinhood, through pricing and now through content, is establishing their brand as the one to beat amongst their peers, and especially amongst millennials and new investors.

Even though their goal of bringing financial content into cultural relevancy seems far-fetched, the reality is they have significant momentum on their side to do so. Unlike their peers, Robinhood is distinct and attractive to a whole new generation of investors.

As it pertains to Canadian online brokerages, the gap between what is happening in the US as far as features, user experience, and pricing is only widening.

From a content perspective, there really isn’t anything being produced by Canadian discount brokerages that materially rivals Robinhood for Canadian DIY investors. Of the major online brokerages in Canada, only TD Direct Investing’s parent TD has a dedicated show via their MoneyTalk channel that has consistently provided market commentary and analysis. Recently, National Bank Direct Brokerage launched a “beginner investor” education series with Larry Berman (of BNN fame), which, while short and informative, is not really the same kind of content that investors would continue to tune in to over the long term.

Although most major online brokerages in the US already have some kind of video content going, the reality is that Robinhood’s launch into the YouTube and Instagram video channels will be highly problematic for other online brokerages to compete directly against.

Robinhood’s accelerating popularity in the US also means they are being watched (and listened to) by Canadian DIY investors, and as a result, Canadian online brokerages will be increasingly challenged to offer comparable kinds of experiences if they truly want to win over their clients.

The longer that larger or existing Canadian online brokerages overlook the importance of compelling content, the greater risk they leave themselves open to if, or potentially when, Robinhood decides to enter a new global market. Of course, it needn’t necessarily be Robinhood that comes here directly that could pose a challenge to the mainstream Canadian online brokerage market. It would just take an online brokerage willing to be thought of as the “Canadian” version. Case in point.

Discount Brokerage Tweets of the Week

From the Forums

Meme, Myself, and I

A Redditor who has learned a lot from the forums is now concerned that they bought into the meme-ification of VGRO in this post. Fellow forum users discuss how “just buy XGRO/VGRO” has become such common advice and their stance on the topic.

Rise and Grind

In this post, a forum user asks how fellow DIY investors keep their spirits up when saving and investing. Replies to the post offer a look into their personal savings philosophies as well as the age-old advice “comparison is the thief of joy.”

Into the Close

That’s a wrap on this smoky West Coast edition of the Roundup. After a surreal run in stocks, it looks like the stretch from now until the presidential election in the US is going to be filled with all kinds of uncertainty. Typically markets price in as much of the future as they can see, and even if they have made some kind of determination of who will be in the White House, the reality is that a lot can (and will) happen in the next 50-ish days that can’t be predicted. On the plus side, anyone looking for a different kind of portfolio volatility can once again turn to fantasy football.  

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