Robinhood and the tumultuous retail investing boom

Mouthy Money editor Edmund Greaves looks at the pandemic investing boom and what it has done to the investment platform market in the UK

The pandemic was a trigger to a boom in the stock market, with US-based investment platform Robinhood the cool posterchild of the wave of retail investors piling into stocks.

So ubiquitous was the ‘meme stock’ era that Hollywood has already made a movie about it called ‘Dumb Money’ and starring Paul Dano, Shailene Woodley and Seth Rogan.

But we’re not in 2020 anymore and the meme stock era looks well and truly over. But is it?

Robinhood has just launched in the UK. One of its rather more ironic offerings is a high rate of interest on cash deposits for customers, currently 5%. But for now, it doesn’t appear to offer any pension or ISA – the cornerstone of long-term saving in the UK.

Before Robinhood arrived, the options for armchair investors had been dominated for many years by a small cohort of key players – including Hargreaves Lansdown, interactive investor and AJ Bell.

According to data from investment and fund data research house Fundscape, these platforms are still dominant in the market – but smaller players – similar to Robinhood – are coming in hot.

This includes platforms such as InvestEngine, which launched a private pension or ‘SIPP’ in January. Fundscape says this drove a big increase in money invested on its platform – trebling in just one year. Perhaps a lesson for Robinhood to take.

There are a number of other players in the space that are still relative minnows – names such as Saxo Bank, Tillit, Nutmeg, CAPEX, Wealthify and others who have been around for some time.

Can such small competitors offer a tempting enough alternative to investors when the big boys such as Hargreaves are so ubiquitous?

This is where our latest podcast with Bella Caridade-Ferreira, Fundscape’s founder and chief executive has some answers.

According to Bella, while investment platform options are looking increasingly crowded, overall choices for investors are broad and confusing, while the ‘saturation’ of the market is low.

This is because despite such a wealth of options, very few Brits are actually actively managing their own investments.

I caught up with Bella on the podcast, and was joined by colleague Chris Tuite, head of consumer finance at MRM (Mouthy Money’s sister business). Bella has a brilliant handle on all the data behind the retail investment boom so have a listen to the podcast for the full look at the market.

For anyone thinking about where might be the best place to invest, her other business Compare and Invest, is well worth a look.

Photo by Pixabay: https://www.pexels.com/photo/numbers-on-monitor-534216/