What does it mean for the future of investing?

The pandemic was a wild time for brokerage businesses. But today, many brokerages which were enticed by the allure of payment for order flow (PFOF) are seeing no sunlight. Call it a post-ZIRP aberration or a broker recession… the broker app-pocalypse is here, and it’s time to put up or shut up.

With trading demand substantially cooler, even Robinhood (the king of neobrokers) has lost over half of its active monthly users since 2021. And unfortunately, it looks unlikely that those users will be coming back anytime soon.

That’s not to say the whole business has frozen over. After all, legacy brokerages like Fidelity and Vanguard remain strong thanks to their outsized influence in the workplace retirement plans of millions of Americans. And even Robinhood has drummed enough demand to make a run on Wall Street. In fact, year-to-date, Robinhood stock is up 42%.

But for many brokers, the slowdown and consolidation currently afoot in the digital brokerage business means trouble — and with venture capital no longer as invested (literally) in investing apps, the latter is an increasingly enticing option.

The Problem with the Broker Biz

Since the start of the COVID-19 pandemic, at least 12 U.S-based brokerages have closed — either as part of an acquisition, a sale of user assets, or business failure. Even in recent weeks, Stocktwits and Goldman Sachs’ Marcus Invest have decided to exit the broker business, porting their users over to would-be competitors.