Robinhood closes TradePMR deal and calls it 'accretive' and cites cash allocation to build RIA referral network
The Menlo Park, Calif. online broker paid $300 million for custody unit that gives it immediate cash flow and market position.
4 min readRobinhood Markets, Inc. today, (Feb. 26) closed on its purchase of TradePMR in a deal valued at $300 million with a few asterisks attached – and a very quick turnaround from its Nov. 19th deal signing.
The Menlo Park, Calif., firm put out a very brief release to say that it is paying 60% cash on $300 million, or $180 million – “prior to customary closing adjustments” – and another 40% or $120 million in the form of “stock-based compensation.”
The deal's structuring allows Robinhood to add to its cash flow immediately upon close, albeit on an “adjusted EBITDA” basis.
TradePMR currently serves around 350 RIA firms, according to 2024 RIABiz reporting, with combined assets under administration of about $43 billion as of Jan. 31st, according to the Robinhood release.
It's a small amount compared to the industry leader, Schwab Advisor Services, with 15,000 RIA clients and a combined $5 trillion, or so, in assets.
Next Gen investors
TradePMR sale to Robinhood sends ripples through the RIA industry both for its potential to rival big custodians and for the discount broker's potential clash with fiduciary culture
Yet, Robinhood immediately elbows into the top ranks as a discrete “RIA custodian,” behind only Schwab, Fidelity, and Pershing. Firms like LPL and Raymond James report high RIA totals in some reports but it can be hard separating out brokerage and fiduciary asset totals from “hybrid” calculations. Interactive Brokers also reports a total that is near to TradePMR.
“Robinhood’s client base is the next generation of investors," said Robb Baldwin, founder and CEO at TradePMR said in an earlier release.
"We believe this acquisition allows us to build a multi-generational platform that will help introduce financial advisors to this next generation.”
Robb and the TradePMR team will join Robinhood and continue to focus on delivering the best experience and support to RIAs. Both Robinhood and TradePMR are committed to maintaining transparency throughout this process, according to the Nov. 19 release.
Valuing the deal
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It plans to invest in its acquisition from an $85 million “cost” allocation – not least to build a referral pipeline from its brokerage to RIAs.
“In 2025, Robinhood expects to record $85 million of TradePMR-related costs, comprised of $45 million of Adjusted Opex and $40 million of share-based compensation,” it writes in today's release.
Robinhood is launching plain-vanilla robo-advisor, an RIA that allocates with algorithms, but walks back intent to use AI and will rely on human teams to pick investments
“This includes business operating costs, product development for a new advisor referral network, deal-related professional fees, purchase price amortization, and approximately $30 million from the $300 million of total consideration and post-close equity compensation.”
Expect more about the referral network in three months time, says a TradePMR spokeswoman.
“We plan to build a referral program that enables Robinhood customers to easily find and connect with RIAs utilizing TradePMR,” she says by email. “Additional details about the program will be released at TradePMR’s annual conference in May.”
TradePMR has yet to respond to a question about whether the $85 million is part of or in addition to the $300 million deal value.
Wealth management
The firm also catapults its brand identity – from hyper-transactional and even sports betting – into the realm of wealth management, with an offering to wealth clients seeking fiduciary care. See: Robinhood pushes back, with force, after CFTC's 'shocking and stunning' rejection of its 'contract' betting bid, after gleaning affirmation in review process
It is also fresh off announcing the launch of its own RIA – at least in the form of a robo-advisor. See: Robinhood is launching plain-vanilla robo-advisor, an RIA that allocates with algorithms, but walks back intent to use AI and will rely on human teams to pick investments
Schwab barely acknowledges the existence of Robinhood (or TradePMR), and its CEO Rick Wurster recently noted that Robinhood's $200 billion in assets under management is just 2% of Schwab's scale. See: TradePMR sale to Robinhood sends ripples through the RIA industry.
“We bring that in in a few months,” the CEO said.
Yet, Robinhood charged zero-fee commissions before Schwab made the move in 2019 and the company has the opportunity to be the pebble in its larger competitor's shoe, again – especially with younger investors.
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