Robinhood Markets has penned an agreement to acquire TradePMR, the Florida-based technology and custodial services provider for registered investment advisors with over $40 billion in assets under administration across 350 firms.
The online brokerage firm will pay some $300 million for TradePMR via a mix of cash and stock, with the deal expected to close in the first half of 2025. CEO Robb Baldwin, who founded TradePMR in 1998, and his team will join Robinhood as part of the transaction. TradePMR will maintain its branding, and it will operate as a subsidiary of Robinhood.
The deal marks Robinhood’s entrance into the wealth management space, as it aims to connect its investors with human advisors, according to the company.
Robinhood, which went public three years ago, has more than 24 million funded customer accounts, the majority of which are millennials and Gen Z investors, with about $160 billion in assets in custody, or around $6,500 per account, on average. Despite the relatively small individual account sizes, Robinhood believes some of its clients will be looking for more sophisticated financial advice as they age.
“We believe this acquisition is the next step in serving these investors as their needs evolve and mature,” Robinhood said in a statement.
The two companies will create a referral program, giving TradePMR’s RIA clients access to Robinhood customers through a joint tech platform. Robinhood investors will also be able to find and connect with TradePMR advisors. Baldwin said he expects that new platform to be rolled out 12 months after the deal closes.
“For many years, the advisor industry has discussed the issue of losing customers when assets transition to a spouse or to heirs,” Baldwin said in a statement.
“This is the solution,” he said, in an interview with WealthManagement.com. “We’re going to meet that generation where they are. And where they are is on Robinhood.”
Robinhood said it expects to maintain TradePMR’s long-standing relationship with Wells Fargo Clearing Services, which provides clearing, execution and lending services. Robinhood’s 24 million customers sit on its own self-clearing platform, which it started building in 2018, Baldwin said.
Baldwin added that Robinhood doesn’t have any overlap with TradePMR’s business.
“Robinhood’s great at retail; they’re great at technology. But they’re not in the advisor space,” he said. “So for TradePMR, we’re going to be left alone to continue to grow and do our business and continue to serve advisors.”
In addition to equities, clients use Robinhood for trading cryptocurrency and options. The firm was criticized during the pandemic for encouraging what some saw as reckless trading among clients with easy access to margin loans and a “gamified” user experience, including rewards, stock giveaways, virtual confetti drops for trades, games and social media sharing. In January, Massachusetts’ regulators fined the online brokerage firm $7.5 million, claiming the gamification features harmed investors by fueling speculative trading, even though Robinhood had largely removed the features by 2021.
Around the same time, Robinhood paid $135 million collectively to the SEC and FINRA to settle, without admitting guilt, charges it failed to execute some trades at the best available price and let unqualified investors trade options.
Robinhood used Citi to advise on the transaction, while TradePMR used Lazard Inc. as its financial advisor.
This is not the first publicly-traded financial services company to try and purchase a foothold in the RIA custody space. In 2020, Goldman Sachs purchased Folio Financial. Morgan Stanley acquired E*Trade, which had an RIA custodial unit, in 2020, but it turned around and sold the custody business to Axos Financial in 2021.
As of 12 p.m. ET, Robinhood's stock was up 1.7% in trading on Tuesday.
