Robinhood Markets has signed an agreement to acquire TradePMR, the Florida-based provider of technology and custodial services to registered investment advisors with over $40 billion in assets under management across 350 firms.
The online brokerage firm will pay about $300 million for TradePMR through 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.
The deal marks Robinhood's entry into the wealth management space as it aims to connect its investors with human advisors, according to the company.
Robinhood, which it went public three years agohas more than 24 million funded customer accounts, most of which are millennial and Gen Z investors, with about $160 billion in assets under custody, or about $6,500 per account, on average. Despite relatively small individual account sizes, Robinhood believes some of its customers will seek 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 clients through a shared technology platform. Robinhood investors will also be able to find and connect with TradePMR advisors.
“For many years, the advisor industry has discussed the issue of losing clients when assets pass to a spouse or heirs,” Baldwin said in a statement. “Robinhood's customer base is the next generation of investors. We believe this acquisition allows us to build a multi-generational platform that will help introduce financial advisors to this next generation.”
Robinhood said it expects to maintain TradePMR's longstanding relationship with Wells Fargo Clearing Services, which provides clearing, execution and lending services.
In addition to stocks, customers use Robinhood for trading cryptocurrencies and options. The firm was criticized during the pandemic for encouraging what some saw as reckless trading between customers with easy access to margin loans and a “gamified” user experience, including rewards, share giveaways, virtual confetti dots for trading, gaming and social media sharing. In January, Massachusetts regulators fined the online brokerage firm $7.5 million, alleging that gamification features harmed investors by encouraging speculative trading, even though Robinhood had largely phased out the features by 2021.
Robinhood used Citi to advise on the transaction, while TradePMR used Lazard Inc. as her financial advisor.
This isn't the first publicly traded financial services company to try to buy a foothold in the RIA custody space. In 2020, Goldman Sachs acquired Folio Financial. Morgan Stanley bought E*Trade, which had an RIA custody unit, in 2020, but it turned around and sold the custody business to Axos Financial in 2021.
As of 6:53 a.m. ET, shares of Robinhood were down 0.26% in premarket trading.