Should I stay with Robinhood?
Outages and Free Trades
Robinhood has had some outages lately. The reason I went with Robinhood as a secondary brokerage was because they offer free trades which my primary brokerage (Vanguard) did not have at the time. The Robinhood web interface is great and it works great on my Android phone as well. Robinhood is protected by SIPC so any funds you put in are secure.
From Robinhood’s website:
Your Securities and Cash are Protected by SIPC . Member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash).
Decided to Combine Accounts
I decided since Vanguard has free trades now to transfer my stocks to Vanguard from Robinhood to combine my funds and to make life simpler.
I could have sold my stocks with Robinhood and transferred the cash to my savings account at my bank, but I would have had to claim the stock trades as short term capital gains and paid the higher tax rate. I have another 6 months before the trades would be considered long term capital gains and I like the stocks I have. I plan on holding the stocks forever unless they stop paying dividends or they have some kind of major issues.
Fees for Transfer
I decided to transfer the stocks to Vanguard and pay the $75 (ACAT) Automated Customer Account Transfer fee from Robinhood.
From Robinhoods website:
If you’re transferring stocks or cash from Robinhood to an outside brokerage, there is a $75 fee.
I read the fine print on Robinhood’s website and they charge $75 to do an account transfer which I think giving the circumstances of them being down 3 times at the time of this writing is a terrible way of doing business.
Robinhood is providing a small compensation for the outages. Here is what they are offering:
Robinhood promised traders $15 off subscriptions to make up for the downtime, and said it would explore additional compensation on a case-by-case basis in the future.
I called and tried to get Vanguard to pay the ACAT fee, but they wouldn’t do it either. I can understand this as they aren’t the ones who implemented the fee. Although, I have heard of other brokerages paying the fees for ACAT transfers from Robinhood. Check with your respective brokerages to see if they will waive the fee for you. If you can get them on the phone you will probably stand a better chance of getting the fees waived.
Vanguard Offers Free Stock Trades
Vanguard implemented free trades most likely because Robinhood, TD Ameritrade and Charles Schwab implemented frees trades. The brokerages seem to follow each other to compete.
Vanguard Joins Commission-Free Trading MovementThe trading subsidiary joined other online brokers in extending commission-free online trading for equities to all of its clients as of January 2, 2020. The base per-leg fee for trading options is eliminated, though clients will pay $1 per contract.
Why I Did What I Did
As a result of the outages and the fact that Vanguard now has free stock trades I decided to combine my accounts under Vanguard and pay the fees. I wasn’t happy about the ACAT fees, but I like simplifying my life even though it cost me a bit of money. I like to dollar cost average into my investments and let the dividends reinvest. Should I stay with Robinhood, the answer is no for now. It may be a great platform for you. If you have a problem with Robinhood you can check their status here.
Robinhood shares there status updates here: http://status.robinhood.com .