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Comment by irjustin | Hacker News Reader

What is this in the context of the wider market vs other Retail brokers?

I don't think this is a knock against RH more a description of what's happening in main-street.

RH was a joke from the start. To invoke a no true scotsman, I know literally zero actual traders using the platform. Value investors like Schwab for it's customer service. Sometimes they prefer other firms (Fidelity). Day traders, etc almost universally use Interactive Brokers. Having done some profitable trading in my day I can tell you that IB's platform is arguably the best if your capitalization is less than 500,000 (at these capitalizations you can often find more bespoke brokers with even better access than IB, especially in futures). Their "pro" tier allows direct exchange access, and their API is complete (though antiquated). I'm not sure if they still do it but I distinctly remember them offering a FIX API if you wanted as well. IB's pro features do take some money. You have to pay for exchange access, and you pay per leg. But, as the saying goes, if you aren't paying you are the product (pfof).

RH made it's money through pfof and capturing COVID relief checks.Their brilliant corner in the market was a frontend app so easy to use that you wouldn't even think about the money you're losing. Since RH's release, most brokers offer similar (if not equal) platform usability and RH's lunch has been completely eaten. I would be surprised if it survived a few more years before either going under or being cannibalized by actual brokers.

RH (and presumably other commission-free brokers) sometimes beat the competition on transaction costs, particularly with low-priced contracts, or where you stand to benefit from blending in with other naive option traders. I maintained cash with them just for that purpose, for a while.

As that's no longer applicable for me, I find more and more reason to move all my accounts to Interactive Brokers. The entire history of their nickel-and-diming fees was easily paid for by letting me enter a single position one day in 4AM-7AM pre-market trading hours, which those other basic brokers (including IBKR Lite) don't support.

RH's health is fine. They are still getting positive net deposits, and they're still adding features. It's a great business to be in. They have insanely high margins and their customers' default behavior is to put more money into them. Once they have IRAs, there won't be a good reason for normal investors who just bag-hold stocks to switch away. They have $6 billion of cash, which gives them a ton of runway.

I certainly think it tells us something about RH. You don't see Vanguard or Fidelity losing a third of their userbase in a year.

Exactly this. RH has a business model closer to casinos than it does to Schwab or Fidelity.

The headline feature for RH is "fee-free trading" which is fine, but once you read past the headline you'll come upon a vast amount of gamification, calls to action, and every other tool borrowed from gacha games and gambling generally.

In that vein I would expect their corporate performance to track more closely with gambling and F2P gaming peers than they would track more established stock trading apps.

More cynically RH's product was making people feel like geniuses in a bull market. The bull market is now gone.

I think it tells that RH did what they intended to do, pull into stock market non traditional investors making it look as an easy way to make money.

The strategy worked for the recent years but these investors probably will be the first ones to jump off the boat when things start looking bad.

> You don't see Vanguard or Fidelity losing a third of their userbase in a year.

I can't read the article, but you define "monthly active users" as a user exiting the platform i.e. pulling their money out?!

Originally, I had assumed it was "users who don't open the app/website" but expectation difference caused me to look it up:

> Robinhood defines a monthly active user as a "unique user who makes a debit card transaction, or who transitions between two different screens on a mobile device or loads a page in a web browser while logged into their account, at any point during the relevant month. A user need not satisfy these conditions on a recurring monthly basis or have a Funded Account to be included in MAU." [0]

I have a Vanguard, I haven't opened it in a month. By the above MAU definition, Vanguard lost me too.

Again, this _alone_ doesn't tell us that RH is doing poorly vs other Retail Brokers. They could be, but not enough info.

My take is - most people don't want to see their ultra red portfolio and are just not opening the app.

[0] https://www.fool.com/investing/2022/05/09/robinhood-losing-m...

> or have a Funded Account to be included in MAU

If you have a balance of $1, wouldn’t you be counted as an active user ?

It sounds to me that an active user is someone with funds or that interacted with the app/website while logged in. I’m not sure the second category made much sense to begin with (unless you wanted to inflate the numbers during a bull run)

This is a contrarian response. Funding $1 would require me to visit the website so I would have been a MAU without even funding. Conversely, funding without visiting the website requires real effort.

No metric is perfect nor stands alone. What does it mean in context to RH, FB, Apple? The value of a MAU is relative. The key is it's well defined, stable and trackable over time. Assigning value is up to diligence at that point.

Funded != funding

You may have funded the account last year and did nothing with it. My understanding is you would still count as an MAU even if you didn’t interact with RH.

Then your understanding is incorrect.

It starts out with "A user need _not_ satisfy". They're saying funding has nothing to do with MAU. The language is pretty clear - "while logged into their account, at any point during the relevant month".

If you don't like it, I get it, but you've offered nothing than "I say they're shady!"

Indeed, my understanding was incorrect. Thanks for pointing it out

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