With Robinhood IPO, Financial Advisors See Everything From Gambling To Wealth Managements Future – Forbes

Robinhood founders Vladimir Tenev and Baiju Bhatt ring the opening bell at the New York Stock ... [+] Exchange along with staff.

Financial advisors are watching with interest as Robinhood prepares to hit the markets in one of the most anticipated initial public offerings of the year, not as investors but as potential competitors and doubters.

Chris Cooke, an Indianapolis-based advisor with eponymous Cooke Financial Group, anticipates a Robinhood effect with clients that will only grow over time. He expects that portfolios full of index and mutual funds may not be enticing for a generation of investors that cut their teeth using the free brokerage app. That could lead to more separately managed accounts where clients can better monitor the underlying stocks. Additionally, he already sees an increased emphasis on user experience and data accessibility that has been key to Robinhoods success.

People expect to have information on a minute by minute basis and a user interface thats quick and effective, Cooke says. The generations that come up in the future will fully and completely expect that client experience, whether they're with Robinhood or with an advisor.

Cooke is no stranger to disruptions in the industry, along with his advising work, he founded RIA aggregator Sanctuary Wealth with his brother Brian.

While he does not anticipate a direct disruption to his business, with clients ranging from $2 million to $200 million in investable assets, he foresees Robinhood being disruptive to the likes of Fidelity Investments and Charles Schwab.

Cooke compares a Robinhood account with a bar account he maintains with clients, allowing them to invest in popular stocks through a brokerage. It is more fun for clients to tell friends they bought Apple AAPL stock over a beer than to say their money manager did, he says.

While he feels Robinhood may be the place where a new generation of clients gets their first impression of the stock market, Cooke expects them to come knocking at his door when they start to take a more serious approach to investing.

There's some number at which people decide their money is important, Cooke says. I don't think Robin Hood is going to be the winner when it comes to that type of investor.

Michael Miller, a top advisor with Wellesley Asset Management in Massachusetts, concedes that the typical Robinhood customer today is young and more focused on trading than investing. However, he think it is still possible that the startup brokerage will adapt to serve a more serious investing audience.

Robinhood is this great platform for kids in their 20s, but that client base is going to turn 30 and 40 and Robinhood is going to want to adjust their business, he adds.

Passing for young in an aging industry, 38-year-old Miller knows people who have made lots of money doing risky trading on Robinhood and has started to have interactions with younger relatives of clients who have used the app. In those discussions, he encourages their limited investing experience but extolls the virtues of a more holistic financial plan.

Jeff Grinspoon, a Virginia-based top advisor with VWG Wealth Management on the Hightower platform, sees much of Robinhoods success as the result of a seemingly endless bull market.

When the markets goes up everyone feels smart, he says, adding that he is skeptical it is a breeding ground for future clients.

Grinspoon wonders what will happen to these new, risk agnostic investors when a bear market hits, worrying that a prolonged pullback will leave them with a misguided and negative impression of markets.

His exposure to Robinhood, through younger family members, has left him encouraged by the newfound investing interest but discouraged that it revolves around speculative investments such as Bitcoin and meme stocks. Grinspoon sees Robinhood as more akin to online sports betting on DraftKings than to the financial planning he does with clients.

While there is still a massive difference between the work done by the likes of Cooke, Grinspoon and Miller and the self-directed trading of Robinhood users, Cooke gives credit where he feels it is due.

I admire what Robinhood has built, he says. There's a place for innovation, they found a niche that theyve exploited.

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With Robinhood IPO, Financial Advisors See Everything From Gambling To Wealth Managements Future - Forbes