The suicide of a 20-year-old experimenting with trading on the Robinhood platform
has many calling for new regulations on trading. I think new regulations on the “Robo”
interfaces are required but not on trading. Robo platforms, like Robinhood, provide a
software interface that makes trading more like a game.
Brokerage firms have been on a serious race to engage directly with the young and the
inexperienced. Robinhood, E-Trade, TD Ameritrade, Charles Schwab, Interactive
Brokers, Fidelity, Merrill Lynch, and many others have all embraced commission-free
and zero-minimum balance trading on platforms that focus only on the upside
of trading. These platforms are more reminiscent of an animated game than a
serious financial transaction. Even those who have managed to make a little money on
day trading often fail to understand that there are tax consequences. They usually
reach out for assistance when they receive from these brokerage firms an unexpected
1099 with a large tax liability.
It is clear that what we need is more clarity on what is a game and what has real life
Edi Alvarez, CFP®
BS, BEd, MS