Stock Trading Apps – Will User Friendly Apps Push Full-Service Brokerage Accounts to the Edge of the Industry?

March 21, 2019

 

Stock trading apps have put the ability of investing in the stock market at the finger tips of millions of people. The convenience of the smart phone apps draws in the large demographic market of millennials, adding new money into the industry.

 

Millennials are tech savvy, and can’t go anywhere without their phone, however many carry large debts from student loans, so to come up with large brokerage account minimums for a full-service brokerage account a commission free, self-managed option is the go-to alternative for those looking to get experience in the stock market.

 

Small budgets, and no stock market experience, no problem. Since I began researching stock trading apps, and being a novice stock trader, I decided to open an account with Robinhood to see what all the hype is about. The initial setup was easy, the app provided large easy to read lettered words that asked basic information such as name, date of birth, social security number, everything you would have to provide to open a bank account. Robinhood will then ask you your personal bank account information so that you can transfer money into your Robinhood account with just a push of a button. There is a verification process where Robinhood will deposit two small amounts of money into the bank account you provided and when it shows up (about 24 hours later) you enter the amounts in the app and then you are ready to start buying and trading stocks with $0 trading fees. I found the interface to be simple, and most importantly not overwhelming with information. You are able to create a watchlist and monitor stocks your interested in, and when there is a significant change in your purchased stocks you receive a notification instantly. Needless to say, I am quite happy with the performance of this app, and yes, I am a millennial.

 

What does this mean for large investment firms like JP Morgan Chase and The Vanguard Group? They will most certainly have to lower their fees for the services they provide while being more transparent to their customers in order to stay competitive with the commission free apps. With using apps like Robinhood and Acorns, there is a sacrifice of not having professional support and advanced research tools for decision making. With this sacrifice, there is a huge cost savings for those who aren’t investing millions of dollars and who don’t require the services available to them that they are paying a high premium for.

 

JP Morgan Chase has answered back to the trading app community with their own “You Invest” service. However, this still does not appeal to the broke college student, or the lower middle class who doesn’t have $15,000 to qualify for their 100 trades for free promotion. The high-end executive approach and consulting with financial advisors is not appealing to the millennials, they want free, easy, and convenient.

 

While the stock market continues to open and close day by day the methods of trading continue to evolve. As the millennials begin to surge the market, their wants and needs will continuously push technology for advancement in this industry. New companies like Robinhood and Acorns will challenge senior investment firms like JP Morgan Chase and The Vanguard Group to see if they have what it takes to keep up with this generation of tech savvy people. Large investment firms will have to decide if their overpriced commission and other service fees are worth being pushed to the edge of the stock market industry.

 

References
 

Daily Hodl Staff. (2018). JP Morgan Targets Millennials, Takes on Robinhood With Upcoming Launch of Commission-Free ‘You Invest’. The Daily Hodl. Retrieved from https://dailyhodl.com/2018/08/24/jp-morgan-targets-millennials-takes-on-robinhood-with-upcoming-launch-of-commission-free-you-invest/

 

Finance. (2018). Robinhood Effect: Why JPMorgan Is Offering Free Stock Trades. Smith Brain Trust. Retrieved from https://www.rhsmith.umd.edu/faculty-research/smithbraintrust/insights/robinhood-effect-why-jpmorgan-offering-free-stock-trades

 

Gralak, R. (2018). The Growth of Robinhood and What It Means for Brokerage Stocks. Nasdaq. Retrieved from https://www.nasdaq.com/article/the-growth-of-robinhood-and-what-it-means-for-brokerage-stocks-cm992045

 

Jolly, J. (2018). Micro investing apps have been popular during the stock market's rise. Do they work when it dives? USA Today. Retrieved from https://www.usatoday.com/story/tech/columnist/2018/03/08/micro-investing-apps-have-been-popular-during-stock-markets-rise-do-they-work-when-dives/390787002/

 

Roberts, D. (2015). How Robinhood, an investing app, is luring stock-market newbies. Fortune. Retrieved from http://fortune.com/2015/03/12/robinhood-investing-app/

 

 

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