Hi all, Julie here. We’re talking about Robinhood once again today, but this time the discussion is going to be around what responsibilities it has around customer education.

I asked this question on Twitter last week to see what you guys had to say, and there were several interesting threads that I’d like to pull out. While the majority of people said Robinhood should provide more education, there were varying opinions around whether the trading platform is violating any regulations. It was also pointed out that if customers aren’t educated, they are more likely to lose all of their money and end up not being a customer anymore, giving Robinhood a 'pretty good' incentive to provide more learning opportunities.

Robinhood’s business incentive:

I want to start here, since it wasn’t actually touched on a lot, but makes a ton of sense and it’s not an angle we’ve talked about before. While Robinhood has tried to shift into other products (like a checking account), it’s hard to imagine them ever being known as something other than a trading platform. For this reason in particular, it’s in their best interest for their customers to actually make money rather than lose it so they can keep trading. This wasn’t too hard during the bull market that has been going on ever since Robinhood started. But it’ll become increasingly hard as volatility spikes and an eventual bear market ensues.

Chris Collins: Not only do they have a responsibility, but it is also in their long-term best interests to do so. If they can be seen as "caring" for their customers it will only bolster their brand.

Tait Foster: Absolutely. As self-described disruptors, it should be seen as a part of their responsibility to educate users while they are taking share (and making money) from gatekeepers and other legacy groups. In general I think society as a whole needs to take this kind of education on

Michael Shane: Also, users who don’t go broke definitely have a higher lifetime value. It’s just good business.

Are they breaking any rules:

I figured this topic would be a bit tricky, and I was right. I’m of the mindset that they aren’t currently breaking any rules, but they are walking some pretty fine lines that are likely to change now that the SEC and other consumer groups have taken notice.

Rita Martins: Legally they don’t have to. But they should do it on a moral and community basis. Regulators should also be brought into this conversation

Rob: Really tough question because where do you draw the line. For example, a car is vastly more dangerous, but the "education" for most is "do it live" with a "teacher" in a trailer at a high school for a couple hours a week.

Jeff Lesser: Do car companies need to educate their customers on safe driving?

Micah Hauptman: They don't have a responsibility to educate IMO, but they do have a responsibility to comply with their regulatory obligations, including the options account approval rule (FINRA Rule 2360(b)(16)). It doesn't appear they have done so.

Nick LiBretto: Ultimately it comes down to individual accountability, but I do feel RH has created a legal sportsbook platform for uneducated users to become addicted to. With $0 comm trades, the door is wide open for people who are easily influenced by social media to make bad decisions

Josh Terry: Legally, only within what the SEC and other regulatory bodies enforce. Morally/ethically, Absolutely, can't imagine selling a product that can cause notable financial impact without some level of user education. I can also see an argument that it can be good for revenue/churn.

Simon Taylor of 11FS: It's not just educate. It's limit features and capabilities until a user can demonstrate sophistication. And now it's caught the eye of the SEC, give it 18 months til we see some sort of action

How this can be done:

Alright, so there a bunch of people from Robinhood who subscribe to FTT+. What can they do to start putting a plan into action around education? First of all, their system for approving people to trade options should probably change. Second, it doesn't have to feel like education. Roboadvisors, digital banks and others often have a lot of things like nudges built in that encourage the consumer to make better decisions without outright telling them what to do. Anthemis's Alex Steiner said he thinks there might be room for more process oriented education around things like capital gains. Drew Wandzilak argued that if the education is done right, it can actually increase Robinhood’s perceived value rather than feeling more like a barrier (although I’d argue trading should feel like a barrier and not something you can just jump right into and do well).

I learned a LOT from all of the responses I got on Twitter, and all of them have merit. The business incentive argument, for instance, is intriguing for a number of reasons. First, it’s fair to say that Robinhood hasn’t done much to educate customers up to this point or set barriers in place to make sure not just anyone can trade options. While there have been some offerings in this realm (which one of their public relation team members had to point out to me since I’d never seen or been told about any of this during my years of covering them at Bloomberg), Robinhood has been more adamant about marketing how easy it is to trade, 0 fees, and a lot of other things implying little to no risk. Although, according to the team member that reached out to me, this is “something we're actively thinking about and always trying to improve.” I hope this is true.

With a firm that has gained a ton of attention thanks to its marketing department, I’ll be curious to watch how ads and other materials change in the future. Not just because of some tragic incidents that have happened, but because it might be good for business as well. Especially when they’re no longer the only place to trade with no fees.