Robinhood Service Technology Fails to Deliver
Robinhood service took from the clients and giving to others! The Robinhood service mobile brokerage app was inaccessible to millions of investors for an entire day on March 2 — a day the Dow experienced its single-largest point gain since 2009 after initially plummeting on news of the coronavirus. The service was not restored until Tuesday, causing Robinhood service users to miss out on the potential gains.
While the incident demonstrates that no technology is foolproof, it brings up an even more critical cautionary tale: plan sponsors need to consider whether or not their service providers’ technology infrastructure is vulnerable to an outage similar to what users of Robinhood services experienced. Often, the financial services industry’s investing infrastructure is built on aging platforms that may not hold up in the event of similar disruptions to Robinhood’s most recent day-long service outage. While digital technology and infrastructure is wonderfully convenient and less costly, it also introduces a very real risk — no technology can effectively deliver 100% uptime. It can, and will, inevitably break and fail.
Robinhood service wasn’t the only digital platform affected by the rampant market volatility. Household-name brokerages like TD Ameritrade, Fidelity, Charles Schwab and Vanguard all experienced similar service disruptions as anxious investors flooded their platforms to check their accounts or make trades. Experts opine that if these firms don’t rebuild their aging platforms, their customers will continue to experience disruptions. This has obvious implications for the 401(k) industry as well — a Robinhood service disruption could have adverse affects on retirement plan participants and their savings.
That said, no technology is without its foibles, and today’s digital technology is a lot more reliable than the dinosaur infrastructure of the past. However, many financial services firms — including large recordkeepers, for example — may still be relying on outdated technology to run their investing and trading platforms. As such, having a human backup, say, a customer service rep who can help an investor execute a trade manually, for example, during a system outage can be beneficial.
Reliance on digital platforms has removed a lot of the human support inherent in the process. Simply put, computers are prone to make fewer errors than humans typically might. However, if neither technology nor humans can be perfect 100% of the time — a feat that’s statistically impossible — then it is critical for financial services firms and 401(k) service providers to have proper stop gaps and fail-safes in place. According to InvestmentNews, “For example, traditional brokerages maintain a massive human workforce to provide support in case of an outage, and customers could still call in to a trading desk if they were willing to put up with phone wait times.”
All fine and well — if a human is available. Purely digital platforms such as the Robinhood service don’t give customers the option to interact with a human being. In fact, during the March 2 service outage, even emails allegedly bounced back to users as undeliverable, giving them zero recourse to get their problems resolved. This raises regulatory issues as well, as to whether or not the Robinhood service met business continuity requirements — measures many established financial services firms have in place as a matter of course.
In addition, the failing of technology platforms highlights the benefit of working with a professional, such as a financial advisor, someone who is familiar with a client’s financial situation and has the knowledge and expertise to intervene when technology platforms fail.
Plan sponsors should be mindful of the shortcomings of their service providers’ technology infrastructure — both old and new. It is important to have in-depth conversations with providers to ensure that they have proper backups and safeguards in place should the technology fail. And don’t underestimate the importance of human interaction to mitigate issues during technology outages. While humans are by no means perfect (and neither are technology platforms), they can work together to help minimize downtime and provide value for end users such as retirement plan participants.