Robinhood was once a symbol of the Everyman’s triumph over brokerage fees, capital requirements, and other barriers that had locked potential retail investors out of the stock market. The company’s innovative investing platform represented a victory for democratizing finance. But through the firm’s ongoing GameStop scandal, that perception has changed. The controversy has shaken many individuals’ faith in their company. Now, people are understandably asking: Are organizations that purport to represent everyday people actually beholden to larger, hidden financial interests?
This is the question the House Financial Services Committee recently sought to answer, when last month Robinhood CEO Vlad Tenev was called to testify. There, he addressed questions surrounding his company’s decision to block customers from buying shares of GameStop amid the stock’s meteoric rise. Only later was it discovered that Robinhood’s major financial backer – Citadel – had a vested interest in short-selling (or “betting against”) GameStop.
The revelation has led many to believe that Robinhood interfered in the market not to protect its users, but to assist its financial backer, Citadel, which stood to lose a lot of money if the value of GME continued to climb. Now, the app purportedly created to “democratize finance” is facing serious credibility challenges.
Is it hard to believe that an organization would prioritize the interests of behind-the-scenes, big-wig financial benefactors over the “everyday people” it claims to represent? Unfortunately, the answer is no – and our nation’s largest (supposed) seniors’ advocacy organization may be the biggest example.
In a situation chillingly parallel to the Robinhood scandal, the AARP bills itself a nonprofit “dedicated to empowering Americans 50 and older.” Much like the embattled investing company, AARP claims to fight for everyday people – the inconvenient truth being that AARP’s decision-making and financial ties suggest that assertion to be blatantly false.
The reality is that AARP consistently sides with Big Insurance over the interests of its dues-paying seniors. Take Obamacare as an example. During the debate over the legislation’s passage, seniors overwhelmingly opposed Obamacare. Despite the clear sentiment against the legislation, the AARP advocated vigorously for the law’s passage. Why the disconnect? Could a quick look at AARP’s financials reveal the reason?
Unbeknownst to most, the AARP retains an exclusive financial relationship with UnitedHealth Group (UHG) – America’s largest insurance company. In exchange for the AARP’s stamp of approval on UHG’s insurance packages, the AARP receives a nearly 5% percent royalty on the insurance products that UHG sells to AARP members. This revenue from Big Insurance to AARP – supposedly a nonprofit – now amounts to almost $1 billion per year, eclipsing AARP’s revenue from seniors’ membership dues. So, who do you think they actually represent?
Researcher Chris Jacobs found that revenue from UnitedHealth constitutes nearly 40% of AARP’s entire budget – or $977 million of corporate royalties in 2019 alone. That’s more than twice the amount of revenue earned from membership dues. Basically, when UHG profits, so does AARP – and when a conflict of interest arises between Big Insurance and the seniors AARP claims to represent, the advocacy organization is financially incentivized to side with the former. It’s no surprise, then, that Obamacare was slated to – and ultimately did – enrich UHG and Big Insurance more generally. And AARP, following the money, dutifully advocated to pass the legislation despite its members’ well-founded objections.
AARP’s advocacy against the interest of seniors isn’t just limited to Obamacare. AARP has been leading the charge to enact foreign drug price controls on the federal and state level, even though this socialist policy would reduce research and development on disease areas such as Alzheimer’s, cancer, diabetes, and more. This does not serve seniors’ interests – but it does (in the short term) line the pockets of AARP’s corporate benefactor.
AARP has also come out against the proposed “rebate rule,” which is currently working its way through the federal regulatory process. The rule lowers the cost of prescription medications by eliminating anti-kickback safe harbors for drug rebates, and instead provides those savings directly to consumers at the pharmacy counter. Cutting out this health care “middleman” would be a big step toward lowering costs. But naturally, it is opposed by AARP, which prefers the rebate goes to its financial partner instead of seniors.
While the verdict is still out on whether Robinhood grossly betrayed its customers’ trust, the case against AARP is ironclad. The similarities here offer a cautionary maxim: Want to know if an organization is really acting in your best interests? Just follow the money.
Jon Decker is executive director of American Commitment.