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Robinhood: Heroic pricing but an ISA is sorely needed

Insiders score

infoMore info
This is the score our team have awarded the platform based on our own personal experiences and other important factors, such as fees and ease of use.

4.0out of 5

Robinhood launched in the UK in early 2024, having built up 20+ million customers in the US market. Currently, Robinhood UK only offers US stocks and ETFs, and there is only one account - a general trading account - but it is a very cheap platform.

pointTrade US stocks without commission or FX fees
pointCapital at risk
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Capital at risk.

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By Clare West

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4.0out of 5

point Trade US stocks without commission or FX fees
point Capital at risk

Clare's view

The Verdict

Average Success Rate

50%

infoRobinhood investing 5-Year Avg
The following dataset includes the performances of ready-made portfolios/funds offered by investment platforms and may include both actively and passively managed ready-made portfolios/funds. Performance indicated is also net of all fees to 31st January 2024, unless stated otherwise; any tiered fee structure will be disclosed. Ready-made portfolios/funds that include cryptocurrencies or any other securities outside cash and equities are not included in the dataset. The dataset only includes ready-made portfolios/funds which are explicitly advertised by their respective platforms as being for ‘beginners’, and which are exclusively offered by the platform itself. Funds which are managed by other providers and may be identically offered across multiple platforms were not included in this dataset. For example, the Vanguard UK All Share Acc. ETF was offered by Plum, but as it is not directly managed by Plum and customers could reasonably access it on multiple platforms, it was not included for the purposes of this research. Other discretely advertised securities or investments are not included.

26.4%

infoIndustry avg.
The industry average is the median average of all fund/ready-made portfolio performance figures we collated from 23 investment providers. To see the full dataset, visit X page.
Robinhood finally arrived in the UK in March 2024. It's been a highly anticipated launch after the brand took on iconic (infamous?) status in the US thanks to the GameStop saga.

Has it lived up to the hype? Well, mostly, yes.

Robinhood offers a proposition that almost sounds too good to be true - no commission fees and no foreign exchange fees, plus a very strong interest rate paid on uninvested cash. So where's the catch? Well, you'll have to be happy to trade through a general trading account as it doesn't offer an ISA. If you've already used up your ISA allowance elsewhere, then that's not a problem. But if this is your only trading account, then by not trading via an ISA, you're potentially making yourself liable for tax that you wouldn't have to pay if you'd picked a provider that offers ISAs.

And I have to take issue with Robinhood stating there's no FX fees as there is still a kind of FX fee in reality. Robinhood insists of calling them "implicit third party fees" that are applied to the market exchange rate when you add or withdraw GB pounds to your account, since all accounts must be funded in US dollars. Having said that, they are extremely low "implicit third party" fees - just 0.03% - which makes Robinhood the cheapest platform, with the exception of Interactive Brokers, to change currencies.

There's another potential compromise to make, too. Robinhood only offers access to US stocks. So there's no chance to invest in UK stocks, worldwide funds, bonds, gilts or any ready-made portfolios. As such, it'll only suit a certain proportion of traders.

But if you are in that category - you'll be getting a very cheap service.

Of course, they are making money somewhere. Leverage is offered for those traders who meet the criteria and with leverage comes additional risks. So remember, trading this way can magnify your losses and you'll need to repay, not just your margin loan, but also the interest charges accrued on it. However, if you stick to trading without leverage, you're getting unbelievably low cost trading without the additional, higher risks.

So what about the service itself? Is it any good? Yes, actually. Robinhood traders are unconstrained by market hours, with 24-hour trading available 5 days a week. That's still pretty rare. Trading 212 offers it, but not many other apps do.

The app has really impressive research functionality too: not just the usual performance charts and fundamentals, but recordings of earnings calls, analyst ratings and trader sentiment all within the app.

The trading platform itself is clearly designed to be simple enough for beginners but the fees are enough of a draw to mean this app could quite easily sit on the mobile phone screen of a more experienced trader too.
arrow-down-orangeRead More
quote

Pros

  • No commission on trading US stocks
  • No FX fees when trading
  • Extremely low fees to convert currencies at deposit and withdrawal
  • High interest rate on uninvested cash
  • Trade US stocks 24 hours a day, 5 days a week
  • Earn income on stocks you own with Stock Lending
  • Margin investing available through leverage
quote

Cons

  • No ISAs - only general trading accounts
  • Can only trade US stocks
  • All monies you pay in are converted to USD
  • FX fee at time of deposit and withdrawal
  • Verdict4.0
  • Fees5.0
  • Trading Platform4.5
  • Research4.0
  • Safety4.0
  • Education1.0
  • Customer Service1.0
  • Portfolio View

Clare's view

Who do I recommend it for?

Average Success Rate

50%

infoRobinhood investing 5-Year Avg
The following dataset includes the performances of ready-made portfolios/funds offered by investment platforms and may include both actively and passively managed ready-made portfolios/funds. Performance indicated is also net of all fees to 31st January 2024, unless stated otherwise; any tiered fee structure will be disclosed. Ready-made portfolios/funds that include cryptocurrencies or any other securities outside cash and equities are not included in the dataset. The dataset only includes ready-made portfolios/funds which are explicitly advertised by their respective platforms as being for ‘beginners’, and which are exclusively offered by the platform itself. Funds which are managed by other providers and may be identically offered across multiple platforms were not included in this dataset. For example, the Vanguard UK All Share Acc. ETF was offered by Plum, but as it is not directly managed by Plum and customers could reasonably access it on multiple platforms, it was not included for the purposes of this research. Other discretely advertised securities or investments are not included.

26.4%

info Industry avg.
The industry average is the median average of all fund/ready-made portfolio performance figures we collated from 23 investment providers. To see the full dataset, visit X page.
arrow-down-orangeRead More
quote

Pros

  • No commission on trading US stocks
  • No FX fees when trading
  • Extremely low fees to convert currencies at deposit and withdrawal
  • High interest rate on uninvested cash
  • Trade US stocks 24 hours a day, 5 days a week
  • Earn income on stocks you own with Stock Lending
  • Margin investing available through leverage
quote

Cons

  • No ISAs - only general trading accounts
  • Can only trade US stocks
  • All monies you pay in are converted to USD
  • FX fee at time of deposit and withdrawal
  • arrowVerdict
    4.0
  • arrow Fees:
    5.0
  • arrowTrading Platform:
    4.5
  • arrowResearch:
    4.0
  • arrowSafety:
    4.0
  • arrowEducation:
    1.0
  • arrowCustomer Service:
    1.0
  • arrowPortfolio View
update-icon

Updates

October 2024 Robinhood launches margin investing

19 March 2024 Robinhood launches in the UK

Who do I recommend Robinhood for?


With Robinhood, you can cheaply trade US stocks, and you can only do it through a general trading account at the moment, as there's no ISA.

That means, you're best suited to Robinhood if you're looking to trade US stocks and you've already used up your annual ISA allowance with accompanying tax-free benefits with a different platform.

Although there are no ready-made portfolios on offer, so you'll need to be happy creating your own investment strategy, Robinhood is a platform that's designed to suit beginners.

That said, there's no reason you couldn't take advantage of the near-non-existent fees as a more experienced trader too.

2.0out of 5

Accounts and assets


Account types

Robinhood only offers customers a general trading account. That's a real shame as no stocks and shares ISA means no access to its tax benefits. All income and gains achieved inside an ISA are exempt from tax. With a general trading account, you don't get these benefits, which is why general trading accounts are something we usually only suggest you use when you've maxed out your annual ISA allowance (£20,000 for tax year 2024/25).

There is also no personal pension. Robinhood may expand its proposition over time but for now, it's a general trading account or nothing.

Assets

Also limited, is the asset choice. Robinhood only offers US stocks.

There are roughly 6,000 stocks to choose from, so a pretty good selection, covering the stocks most people are interested in. You can also trade Fractional shares are portions of shares (or ETFs) that are smaller than one whole share. They are designed to make ownership of large, expensive shares more accessible. fractional sharesinfo – a bonus if you're a smaller-scale or a new investor wanting to test the water.

Margin investing

Robinhood offers [sc_Margin investing word=”margin investing”]. This gives customers increased buying power based on the value of assets in their investment account, which serves as collateral. Historically, UK retail investors have had challenges accessing features like margin investing as traditional brokerage firms often impose high fees or reserve competitive rates for those with the largest portfolios of wealth. Robinhood has set out to provide margin with more competitive rates:

6.25% for up to $50K
6.05% starting at $50K and up to $100K
5.75% starting at $100K and up to $1M
5.50% starting at $1M and up to $10M
5.45% starting at $10M and up to $50M
5.20% starting at and above $50M

You'll need to apply and be approved by Robinhood to open a margin account, as per FCA rules about the appropriateness of these accounts for customers. That's because trading with margin comes with additional, very high risks, including the risk of owing far more than your original trade was worth if it does not return a profit.

4.5out of 5

Fees


Looking at the list of all the fees you DON'T have to pay with Robinhood could leave you thinking this platform is too good to be true. There's:

  • No commission to pay
  • No FX fees on trades
  • No account or subscription fees
  • No withdrawal fees

The “zero FX fees” claim feels a little misleading as while there are no FX fees to pay when you make a trade, that's because you've already paid for currency conversion when you deposit or withdraw funds. All Robinhood accounts must be funded with US dollars, so you'll need to pay to convert your sterling up front. However, the rate Robinhood charges for this service (or to be exact, the third party they use to carry out this service for their customers) is very, very low. Just 0.03%. To put into perspective just how bargain-level-low that is, take a look at this chart:

Robinhood is cheaper than even Trading 212 and equally as cheap as Interactive Brokers.

And if you want to get a sense of just what a difference the lack of FX fees makes on trading costs, take a look at this comparison:

The crazy low rates for exchanging currency, in addition to zero commission, makes Robinhood a bit of a no-brainer for US stock trading, if you can get over the lack of an ISA.

“portfolio

It does of course beg the question, where is Robinhood making money then? Because trading platforms must make money somehow.

Well, Robinhood somewhat recoups that lost FX income by offering [sc_Margin investing word=”margin investing”] with leverage for those clients who meet the criteria to trade in this way. Trading with leverage can magnify your losses and you'll need to repay, not just your margin loan, but also the interest charges accrued on it. However, if you stick to trading without leverage, you're getting unbelievably low cost trading without the additional, higher risks.

Robinhood also offers an excellent rate of interest on uninvested cash; currently, 4.75% AER, so it's also a great place to hold your money in between trades.

FAQs

Robinhood is authorised and regulated by the FCA so it is a safe provider to use. Customer monies and assets are protected through an US-based protection scheme which, in the event Robinhood ceases trading, pays out eligible claims up to $500,000. Robinhood customers are not covered by the FSCS, however, as cash and securities are held by a US clearing broker.

An FX fee is the fee you pay a provider to exchange currencies for you. It is paid in addition to the market exchange rate – the price to sell one currency and buy another. FX fees are a kind of service fee.

Yes, Robinhood is well-suited to trading beginners. It's an easy-to-use mobile app that makes trading simple. However, you'll need to be happy to trade only US stocks as that's all that's offered.

Ask the Insiders


Have a question about Robinhood that we haven't covered? Ask it here and we will get back to you as soon as possible!

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