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Robinhood's weaknesses compared to Charles Schwab include a lower average user account balance, which limits its resources for growth. Robinhood also relies heavily on payment for order flow for revenue, a structure that has recently led to a $65M fine from the SEC for misleading users. In contrast, Charles Schwab generates significant revenue from interest on user accounts and account management fees.
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Now for some weaknesses. The average Robinhood user has around $5,000 per account vs the average Charles Schwab user, which has around $100,000 per account. The Median amount in a Robinhood account is even lower at $240. This limits Robinhood's resources to grow. By contrast, Charles Schwab makes 50% of its revenue purely off interest from its users' accounts, which reached as high as $6.1 billion in 2020. Another way Charles Schwab makes money off account management fees, while Robinhood makes 80% of revenue from payment for order flow. This payment structure is also an external threat against Robinhood, as the SEC recently fined the company $65M for misleading users with the process.
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