The Truth Behind Robinhood’s Gamified “Investing”

The global pandemic triggered an explosion in retail investing. This was due to several factors including (but not limited to) people receiving US Government stimulus checks, lockdown boredom, or simply the perception of making a slow, steady buck is no longer a viable option in the current economy. And with the rise of retail investing came the proliferation of gamification; that on-screen “reward” of fireworks or ticker tape dropping from the ceiling after you make your first trade. Almost all smartphone apps are engineered to keep you coming back for more screen time, and in the case of investing apps, that screen time can often come with putting your money on the line.

Robinhood is one of the more popular commission-free stock trading platforms in the United States that was used heavily during the GameStop short squeeze. Like many trading apps and robo investor services, Robinhood makes it easier than ever to begin trading your wealth and savings. But that accessibility can be a double-edged sword with risks that few people profit from. 

Dr. Terrance Odean is on the Matson Money Academic Advisory Board and was a guest speaker at the 2021 Advanced Advisor Conference. His presentation titled “Robinhood: Investing, Trading or Playing a Game?” explored the ecosystem of online retail trading, how the platforms make their money, and most alarming, the percentage of people who did poorly on their trades.  

Mark Matson revisited the topic at this year’s 2022 Advanced Advisor Conference. These dangerous technologies can destroy dreams. They use slogans to promote their platforms that appeal to the “every-day” investor and market themselves as “cheaper and easier” than the traditional financial advisor..Advisors should be here to help make people’s lives better. We want them to have their dream. Not speculate on their money and gamble. He also reminded us that there’s no such thing as a free lunch, and to remember that when it comes to trades.

Follow the Money

When trading apps such as Robinhood advertise “commission-free” trades, where does the platform make its money? According to Dr. Terrance Odean’s research, payment for order flow which is defined by Investopedia as “compensation and benefit a brokerage firm receives for directing orders to different parties for trade execution. The brokerage firm receives a small payment, usually fractions of a penny per share, as compensation for directing the order to a particular market maker.” Robinhood is effectively taking payment from high-speed trading firms to feature a particular stock. It’s a system where Robinhood and its client trading firms profit most (if not all) of the time and statistically, the average investor profits rarely. 

The Biggest Loser

Adding to the gamification of Robinhood are the hyper-connected communities on social media platforms such as Reddit. Information is shared so fast that users are compelled to buy in fear of missing out on what appears to be a profitable trade based on speculation. The resulting surge of buyers pushes up the stock price, but as Dr. Odean’s statistical evidence shows, the spike is only temporary. Those that are “late to the party” with buying the stock typically ended up losing.

Information has never been more readily available and accessing retail investing platforms has never been easier. It is now possible for investors to take more risks, more often that have potentially dangerous outcomes. This exists with a potential marketing message of “democratizing investing for all,” when in reality, people may be gambling with their wealth in a gamified environment.

Have a question? Learn more about Matson Money and how we can assist you in the journey to achieving your American Dream? Contact us or email us at

Academic Advisory Board Members receive compensation from Matson Money for their services, and in exchange, provide independent consulting services to Matson Money leadership, co-author white papers, appear on Matson Money webcasts, and make speeches at Matson Money conferences. 

Matson Money, Inc. “Matson” is a federally registered investment advisor with the Securities Exchange Commission (“SEC”) and has been in business since 1991. In Canada, Matson is registered as a portfolio manager in Ontario and British Columbia.  Registration with the SEC and the Canadian securities regulatory authorities does not imply their approval or endorsement of any services provided by Matson. This presentation is based on the views of Matson.  The concepts discussed herein are for educational purposes only. It includes the opinions, beliefs, or viewpoints of Matson Money and its Co-Advisors and should not be relied upon for entering into any transaction, advisory relationship, or making any investment decision.  Other organizations or persons may analyze investments and the approach to investing from a different perspective than that reflected in this presentation.  Nothing included herein is intended to infer that the approach to investing discussed in this presentation will assure any particular investment results.

All of Matson Money’s advisory services are marketed almost exclusively by either Solicitors or Co-Advisors (“Promoters”).  The term “Co-Advisor” is equivalent in meaning to the term “Promoter.” Co-Advisors are either unaffiliated separately registered investment advisors, or registered representatives and/or investment advisor representatives of unaffiliated dual registrant brokerage firms.  Matson is not affiliated with the Co-Advisors or the firms with which they are associated.  Each Co-Advisor enters into a contractual agreement to serve as a non-discretionary Co-Advisor with respect to clients referred by the Co-Advisor to Matson.  Solicitors typically do not enter into investment management agreement with clients.  Both Co-Advisors and Solicitors have similar responsibilities including promoting and referring clients, and client coaching, including maintaining suitability information, routine service issues, and relationship management.  All Co-Advisors are independent contractors, not employees or agents of Matson.  Co-Advisors are paid fees as set forth under the tri-party Investment Management Agreement.   Such fees are negotiable and may range from .20% to 1.2% of Account Owner assets under management. Matson does not retain any portion of these fees and is compensated only through advisory fees embedded in the Matson Funds. 

The Co-Advisor receives an annual fee, paid quarterly in advance by Matson, based on total assets under management of the Co-Advisor’s clients. Generally, the greater the assets under management that the Co-Advisor’s clients have, the higher their annual compensation will be. Due to this compensation arrangement, the Co-Advisor has a financial incentive to promote Matson in lieu of other financial services providers, which results in a material conflict of interest.

Account Owners referred by other Co-Advisors may pay lower advisory fees for comparable services as a result of the range of fees available at each asset level breakpoint. 

Co-Advisor’s fee may be paid directly by Account Owner to Co-Advisor or this fee may be deducted from Account Owner’s account by Matson and paid by Matson to Co-Advisor.  No part of this fee is retained by Matson. The Co-Advisor’s relationship with Matson, including fees payable from the Account Owner’s Account, is governed by a separate agreement between Matson and the Co-Advisor. The nature of this relationship creates an inherent conflict of interest.

Additionally, Co-Advisors who have entered into a Co-Advisory Agreement with Matson Money can also choose to enroll in the Matson Money Brand Ambassador program under an additional separate Brand Ambassador Agreement with Matson Money. A Brand Ambassador can use Matson’s Licensed Marks in connection with the operation of its business as an investment advisor, and Matson grants the Brand Ambassador a license to use the Licensed Marks, subject to the terms and conditions of the Agreement. In addition, the Brand Ambassador retains Matson to provide certain operational consulting services in connection with the Brand Ambassador’s business operations and use of the Licensed Marks, and provides such Operational Consulting Services which includes additional training and coaching, subject to the terms and conditions of the Agreement. Matson Money receives compensation for the Brand Ambassador arrangement of approximately $100,000 to cover the cost of creating branded assets like films, presentations, logos, and other various marketing material, as well as additional services like in-depth training and coaching for leading the American Dream Experience. Some additional expenses can be charged for additional services.

In Canada, Matson acts as a sub-advisor to another registered portfolio manager (“Advisor”).  Matson is not affiliated with the Advisor.  The Advisor and Matson have entered into a sub-advisory agreement, under which Matson has agreed to sub-advise client accounts managed by the Advisor.  Client accounts are invested in strategies managed by Matson. The Advisor is responsible for client onboarding and account opening collection of know-your-client information and suitability determination and overall client relationship management.

All investing involves risks and costs.  Your advisor can provide you with more information about the risks and costs associated with specific programs.  Your advisor is not affiliated with Matson Money, Inc. The information contained in this material is for educational purposes only and is not intended as investment advice. No investment strategy (including asset allocation and diversification strategies) can ensure peace of mind, guarantee profit, or protect against loss. 


“Attention-Induced Trading and Returns: Evidence from Robinhood”

Barber, Huang, Odean, & Schwarz, 2021