$90T Wealth Transfer! Robinhood's Plan to Capture It All (CEO Vlad Tenev)

Gen Z are the most retirement savvy and long-term investment savvy generation we've ever had.

Yeah. They're opening retirement accounts at earlier ages than any generation in the past. I think the average age of Gen Z opening a retirement account at that point was 19. So it might have gone up since then, but it's probably like early 20s. When you compare it to, they're at 25.

Always a pleasure to be with you guys. Thank you.

Oh gosh, I'm in the ring. Okay, I'm ready.

We think about it quite a bit. And I think if you look, a lot of companies have started talking about this great wealth transfer. And of course it was sort of like in niche circles discussed, maybe like by economists and stuff like that. But I think you can trace back the origins of it being a big fintech topic to last year when we launched Robinhood Banking at our Gold event. And the way we think about Robinhood at the highest possible level is we want to serve all customers, whether they're business or institutional, whether they're US or international. And Robinhood should be the place where all of your money and assets are served best. And it should be as easy as possible to deposit into Robinhood and as easy as possible to withdraw. But we also treat every withdrawal as an opportunity or a defect with the system that we can fix. And we think that we have a huge opportunity as these older generations are having inheritance events and giving money to younger to not just serve the older generations but to have all the products and features so that you're at a disadvantage keeping your money and assets elsewhere. That's really been informing our strategy of what types of products and features we wanted to add to the ecosystem. Obviously credit and banking gives us access to a large chunk of assets out there that are being stored in checking and savings accounts and also the spending flows which comprise so much of what customers do with their money. And then if you look at this year, custodial accounts, trust accounts, expanding the assets that we offer on the platform that helps us go after both sort of like the youngest customers at the point of receiving assets, but also wealthier established customers, which is where the assets currently sit. So, it's not like we're just sitting there waiting for people to inherit money. We're trying to serve the parents and grandparents and make it clear they're at a disadvantage using any other financial platform today. And I think that positions us well when we get to kind of the hump of the wealth transfer which we anticipate will happen in about 8 to 10 years.

Yeah, I think that we'll definitely have 24/7 365 markets. That's something that we started like pushing towards in 2022 on the equity side with 24-hour market. And now you see the industry catching up. A lot of the exchanges are making plans to go 24/7 and open on weekends. And I think the technology is certainly there and there's some work to be done but I think it's going to happen much before then. Tokenization, which is another thing that we were pushing ahead with. Last year, we did an event in France where we launched tokenized versions of a large number of US stocks. I think we're at well into the thousands now. We've been expanding that offering and also the OpenAI and SpaceX stock token giveaways. And so that's still early and we're still in phase one of our journey, but I think by the end of this year, we should be at a point where the stock tokens actually have advantages over buying traditional stocks in a brokerage account. And I think that's very exciting. And you can imagine if you can solve 24/7 liquid access with private equity, that to me is the hardest version of the problem. So that allows you to have 24/7 365 markets for pretty much everything.

There's two parts of the tech stack, right? There's going to be the CeFi components, which is the tradability of the stock tokens on Bitstamp and other centralized exchanges. And obviously, we're gearing up for that. And also the DeFi aspect where if you want to go on your non-custodial wallet and swap or engage with DeFi protocols, we're working to enable the stock tokens to be on DeFi on Robinhood Chain and eventually other chains as well. So, we're doing both. And yeah, we don't really think about it as, you know, we're going after any particular legacy provider. I think this is just a new thing and probably the closest analog is you know you can do all these things in the crypto ecosystem with like collateralized lending and borrowing, swapping, but you're doing them with tokens that typically don't have underlying utility. So what happens when you actually have them tied to real world assets? I think it'll feel very similar, but it'll also hopefully feel better because it's not just meme coins, but you're actually using the power of the technology for trading and swapping assets with real fundamental utility. In terms of when it's available, I think the other thing after the bigger question is like how can we ensure what the product that people want is right and what's the delta. And the thing about the US is we already have robust market structure, we have existing ability to trade stocks. It's not 24/7 yet but it's like 24/5. And I think we'll get to the end state in the US, which is, you know, you being able to trade 24/7, 365 at the lowest possible fees and it'll be a mass market product. In fact, I think we're probably like 90% there. And so it's a little bit less clear what the value add is and whether consumers will actually even understand the difference between tokenized stocks and others. But I still think EU and outside the US will happen first and then there may be certain situations in which it's better and you'll see that ported to the US at some point later.

Yeah, the strategy is really full stack. I mean, in order for the ecosystem to work, we need to bring in a lot of customers. And so through Robinhood app and increasingly Robinhood Wallet, we're growing distribution and we have customers that are coming in that have interest in these services. Then we also have the opposite end which is the infrastructure both CeFi and DeFi. And for DeFi we've got Robinhood Chain which you guys mentioned we launched the testnet of. And I mean the testnet has been going really well. Like the amount of engagement from developers and applications exceeded our expectations. And you know at the beginning I thought okay Robinhood Chain worst case scenario is this is like a chain for us to tokenize our own products and offer them to our customers, right? And even in that scenario I think it becomes one of the biggest chains. But what we've seen is the developer activity and interest has exceeded our expectations. So now I'm getting increasingly confident that actually people are going to want to integrate with the chain, developers are going to want to build and offer products very quickly on it. And so then the problem becomes one of curation, right? We'll have all these products on the chain. We have all these customers. How can we make sure that the best of those products make its way to our CeFi and large distribution products so that you know our customers can sort of like find their way around the sea of just like thousands of products that on the surface seem very similar but might have different risk profiles, different dynamics underneath.

I think they're good for society. And I think what a lot of people don't realize about prediction markets is sure there's trading and volume that's happening on them. The trading and volume is much smaller than it is in equities markets or options markets. But there's also a much broader use case of these being used as truth machines, as being alternatives to traditional news media. So, more and more Americans are increasingly turning to prediction markets to have clarity on what's true or what's likely to happen. And it used to be that they would go to news media for this, but as the business model of news media has gone further and further away from giving you the truth and giving you the information or what's likely to happen as quickly as possible and more toward how can we delay you getting the information so that you're just like entertained and can watch more ads. That's opened up a hole for the original purpose which is let's say I want to know something and get like the actual information, what's the mechanism for that? And I think prediction markets have filled in that gap quite well and you'll see over time that they just proliferate everywhere.

Yeah, absolutely. So the product you mentioned, Robinhood Social, we announced that at Hood Summit and that's going to be rolling out to customers in the coming weeks. It's already in internal testing and one of the I think big differentiators is that we have so many assets available and prediction markets in particular are going to be a first class citizen. So you'll be able to see the prediction markets trades and kind of the comments around those from people in the ecosystem. So I'm a huge believer in user generated content like you're just not going to be able to curate everything and be able to catch all the breaking news and all of the new things that happen with prediction markets. But if you have millions of customers that are all participating, trading or just engaging otherwise in the markets then I think you'll surface a lot of great things even before much before you can curate. Now, we think there is room for curated first-party news as well and that's where Sherwood Media, which is our media arm, comes in and, you know, they're turning out content, high quality content on a daily basis and more and more of that has prediction markets integrated.

We partner with Kalshi and also another exchange, ForecastEx. And in a sense, if you look at all of our other products that we offer for customers, most of the time we don't have the absolute full stack, right? For equities we're not the exchange, right? Some of our orders end up executed on exchanges but we ourselves aren't an exchange. We work with lots of other counterparties to do that, but we do our own brokering and clearing. So if you sort of think of it as three entities helping make your stock trade possible, we have two of them. The introducing broker, the clearing broker, but not the execution venue. For crypto, we do all three. So we execute, we custody, we broker and you know with Bitstamp we now have an exchange venue for prediction markets. I think it'll evolve similarly to how crypto has evolved. So we don't send 100% of our orders to Bitstamp. We send a chunk. Bitstamp competes with all of the other venues for who can serve customers the best. And you know they have certain advantages being part of Robinhood Engineering and we have a great engineering team and we've just sort of cut our teeth on high performance products but they compete as an exchange business on a level playing field with all other market makers and exchanges and that's also the idea for prediction markets. Of course, we expect that when we get our own venue up and running, they'll do well. But at the end of the day, what we prioritize is making sure customers have the best product experience.

Yeah, I have a hot take on this. I actually don't believe in the thesis that entertainment is driving a huge chunk of financial activity. I think that what's actually happening is nobody wants to talk about the non-entertaining aspects of it and you know tweets about those things don't go viral, right? It's like not an interesting take to talk about how fast growing Robinhood's retirement business is or what percentage of our assets are in passive vehicles like ETFs or how much our customers are diversifying and investing safely for the long term. So what you end up happening is that stuff is going on. Nobody's writing articles about it. It's not going viral on Twitter. And so you have the perception that oh my god everything is turning into this like degen entertainment space. But what's happening is our attention is just being hijacked by those types of things. And so we just assume, I think it's a big logical fallacy that humans have. They assume that because someone's talking about something a lot then that's like the most important thing. But yeah, I don't think it is. And when we look at actually our activities and what's happening on the platform, 40% of assets are now in passive vehicles, which include retirement, ETFs, cash, and I think that's going to be a growing number over time. And if you look at even our most active traders like the folks that are trading options and futures, those are the people that are most likely to also use our passive products like Robinhood Strategies and retirement. And what their relationship looks like is multiple accounts. They bucket their activities into different accounts, use them for different purposes, and even within an individual, some of their activity might be speculative trading or more systematic trading, but they typically have a larger portfolio that's more passive at some level.

Absolutely. Yeah. Actually, Gen Z are the most retirement savvy and long-term investment savvy generation we've ever had.

Yeah. They're opening retirement accounts at earlier ages than any generation in the past. I checked this statistic a couple of months ago. And you guys can look it up and keep me honest, but I think the average age of Gen Z opening a retirement account at that point was 19. So it might have gone up since then, but it's probably like early 20s when you compare it to, they're at 25. So people are generally, I think Gen Z is very savvy and very attuned to long-term investing. And I think if you look at the traders as well, a lot of people just lump active trading into the gambling bucket, but in reality, there's lots of different types of active trading. And there are folks that are incredibly systematic and are out there looking for mispricings, you know, and they're on the Discord chats and you can see them on X, but they actually have legitimate strategies for all types of products, you know, futures, but also things like sports, prediction markets. And so I would just distinguish that activity, which is strategic and systematic, from what a lot of people call gambling, which is basically like, you know, I'm going to put five bucks on my local team because I have an emotional attachment to it. I think that's an important distinction.

Yeah, I think access is definitely part of the story. I mean, we've seen huge adoption of our retirement product. The economics and the incentives being pointed toward retirement help quite a bit as well. If you look at what products we actually incentivize, I mean, for a Gold member, retirement gets you a 3% contribution match. Not to make this sound like an advertisement because that's not the intent, but that's actually a lot of people are like, 'Oh, well, Robinhood's incentivizing all these speculative products.' You look at what we actually incentivize, it's retirement. And I think that resonates because if you look at the tax advantages of a retirement account and then you look at, you know, we're basically giving you a match. And the increasing trend of more and more people becoming independent contractors, not having traditional full-time employment, but doing gig work or doing contracting. I think it's a good product to come fill in that gap because a young person in this country has a little bit less ability to rely on traditional 401ks or employer sponsored pension plans. So there's a gap that right now, I think we're coming to help fill. And retirement assets have grown from zero a couple years ago to north of 25 billion as of our latest quarterly earnings. So, it's been growing tremendously. Robinhood Strategies, which is our digital advice product, basically a set it and forget it system. You put money in and technology as well as our team of investment professionals managing that on your behalf as a fiduciary. That's grown from zero to about one and a half billion in about a year since that was announced. So, that's been growing very quickly as well. And then you guys probably saw Robinhood Ventures. It's intended to be a long-term vehicle, right? You're not trading these individual names, but instead we're creating a portfolio of privates. I think that the information that you have out there on the internet, there's a lot of really good personal finance content, not just trading content, as well as the tools that we offer people have really moved the needle here.

Proud of you. That's great.