While details are slim, Robinhood CEO Vlad Tenev said on a public call with investors this weekend that the company was weighing whether to add traditional and Roth individual retirement accounts (IRAs), based on demand it’s seen from current customers. Tenev and two other Robinhood executives presented company information live and answered investor questions in virtual road show.

“Retirement isn’t necessarily something that a lot of [Robinhood investors] have been looking for out-the-gate, but we want to make long-term planning a habitual process for them so that they can be in a better place when they are older than their parents,” Tenev said on the call about the company’s customer base, which currently can only open up taxable brokerage accounts with Robinhood. (A Robinhood spokesman said the company is in a “quiet period” due to its IPO and declined to comment further for this story.)

The addition of retirement accounts could reel in even more money in addition to the $81 billion in client assets Robinhood currently has in its custody. But there are other considerations, too, such as whether investors will take risky bets on money intended for retirement savings; or whether adding new retirement accounts may draw another critical regulatory eye to the brokerage.  

“Democratizing investing is great in theory—encouraging rapid trading probably isn’t, especially with retirement accounts,” Scott Smith, who conducts investor behavior and advisory relationship research at Cerulli Associates, said in an email.

Retirement accounts are, by definition, intended for long-term investing, or at least are supposed to be. The IRS offers notable tax deductions and incentives to individuals in order to encourage them to set aside some funds for their future. The catch is that investors can’t withdraw the money until they’re over 59 ½ —that is, without incurring income taxes and an additional 10% tax penalty. 

Investors often set up retirement accounts as part of their employer’s 401(k) plan. When they switch jobs, they can rollover these funds into external brokerage accounts at companies like Fidelity or Vanguard—and maybe soon: Robinhood. Financial services companies also let investors set up self-directed retirement accounts on their own, entirely separate from company plans. 

The retirement plan market is huge—more than 60% of U.S. households have a retirement plan through work, or on their own, according to 2021 research from the Investment Company Institute. Depending on the type of plan, such as whether it is an employer-sponsored or self-directed IRA, these kinds of accounts can be subject to different regulations than standard brokerage accounts. 

The brokerage industry is regulated by the Financial Industry Regulatory Authority and the Securities Exchange Commission—both of which have levied penalties against Robinhood over things like misleading customers, system outages, or approving unqualified investors for options trading. Retirement accounts, on the other hand, are sometimes overseen by the Department of Labor, which could open up Robinhood to entirely new regulatory oversight, depending on how the company would handle aforementioned IRA rollovers.

“I would argue that what this does is broaden the regulatory scrutiny that Robinhood would be under because of the [Department of Labor],” says Stephen Murphy, who oversees broker-dealer strategic and regulatory guidance at Foreside, a compliance consulting company. 

Robinhood’s most recent infraction was issued by the Financial Industry Regulatory Authority, with its largest penalty ever—$70 million—over “widespread and significant harm” to its customers, “including millions of customers who received false or misleading information from the firm,” according to the regulator. 

Additional growth—whether it is business complexity, additional revenue, or starting to reach new types of investors—may draw fresh focus from financial regulators, as there’s more potential to harm investors, according to Murphy. And whether Robinhood adds retirement accounts or not, Murphy anticipates the company will be facing heightened regulatory attention, regardless, based on recent penalties sent its way.

Regulation aside, it’s unclear how Robinhood investors would trade within retirement accounts at the brokerage, should they become available. “While the conventional wisdom would be [that] you probably shouldn’t be day trading the retirement account, I’m not aware of any [regulatory] rule that prevents you from doing that,” Murphy said.

Since its inception, and particularly after the meme stock frenzy earlier this year, Robinhood hasn’t exactly been known for attracting long-term and buy-and-hold investors, although its IPO filing notes that “most of our customers are primarily buy-and-hold investors” and the “vast majority” of them aren’t pattern day traders. Still, the company is a haven for novice traders: More than 50% of Robinhood’s client base had never opened up a brokerage account prior to depositing money with the company, according to Robinhood’s IPO filing. Robinhood has become known as a brokerage of choice for individuals who want to take bets on stock price swings. Its business model closely supports that behavior. 

In 2020, more than 75% of Robinhood’s revenue—about $720 million—stemmed from transaction-based revenue. The company becomes more profitable as more of its investors trade, as this transactional revenue stems from the controversial practice of payment for order flow: where trading firms give the brokerage small sums of money in exchange for getting to execute their investors’ trades.

There is evidence that many investors do use the Robinhood platform for more general, longer term investments, and not just equity, options or crypto betting. Some of the top-picked investments on Robinhood are a handful of broad-market index exchange-traded funds, including the Vanguard S&P 500 ETF. ETFs like this are typically favored by investors who want to take a more risk-averse approach to investing, but still gain access to equity market returns. 

Additionally, Robinhood claims that some of its features are geared toward long-term planning (Tenev called them “breadcrumbs” to long-term planning). Tenev pointed out on the recent IPO road show call that investors can make recurring investments on the Robinhood platform and that fractional shares can help investors diversify holdings.

In any case, introducing retirement accounts will certainly add more money to Robinhood’s platform—particularly if its younger customers switch jobs and can roll over 401(k) balances, said Smith. “Opening up for retirement accounts,” he said, “clearly gives the opportunity to capture more assets.”