Stock app Robinhood nudges users to take risks

When smartphone owners pull up Robinhood’s investment app, they’re greeted with a variety of dazzling touches: bursts of confetti to celebrate transactions, the price of bitcoin in neon pink and a list of popular stocks to trade.

Charles Schwab, meet Candy Crush.

Robinhood, started in 2013, is the most popular of a wave of apps to have emerged in recent years that try to reinvent the previously staid world of personal finance for the smartphone era. Its promise of zero-commission stock trades has helped it grow to more than 6 million users and a valuation of more than $5 billion.

While most financial services companies now offer mobile apps, they tend to be smaller version of their sober websites, geared at keeping users informed and educated while also offering the chance to trade. By comparison, Robinhood’s technicolor interface encourages users to buy and sell investments in a slick, smartphone-native environment.

But personal finance experts who spoke to NBC News said that the app’s success comes with some risk for consumers, particularly those new to investing. Rather than directing users to adopt a coherent strategy, the app pushes riskier options like individual stocks and cryptocurrencies — and even offers trading on borrowed money, known as margin, and options trading, both of which are used by advanced investors but carry extreme risk.

“I liken it to giving the keys of a sports car to a 12-year-old,” said Tara Falcone, a certified financial planner and the founder of ReisUP, a financial education company.

The way that tech companies design their apps — most notably the tricks they employ to spur user engagement — is under more scrutiny than ever before. Facebook and Instagram have been criticized for encouraging endless scrolling through social media feeds, while YouTube’s recommendations system that works to keep users watching has been blamed for pushing users toward videos of conspiracy theories and extremist rhetoric.

Robinhood has…

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