There's a "crisis in investing education," according to mobile trading app Tornado's CEO and co-founder Bernard George.
"Every week, there are headlines about young investors, gambling on penny stocks and options, and even bankrupt companies. And our view is that the only way to really solve that problem is to make smart investing highly engaging, so it becomes that path of least resistance for people," George told Yahoo Finance Live on Tuesday.
With more time spent at home during the pandemic and the rise of no-fee trading, most notably Robinhood (HOOD), there's been an influx in first-time investors and traders.
However, George believes "the key question" for retail investors is "does your brokerage help you invest better?"
"And I think for a lot of investors, unfortunately, the answer is 'no,'" George added.
"[As] a lot of new investors enter the market, obviously there's a need for education and the ability to take that next step. And democratization of access to markets has been a wonderful, amazing thing. It's just left a lot of people in that state where they're looking for that next step, and how do I continue my journey towards becoming a better investor?"
According to George, Tornado's online brokerage centers around community through its social investing platform allowing for "meaningful conversation" with investors at all skill levels, curated and personalized educational content from "leading voices," and "world-class analytical tools." Tornado charges a $4.99 monthly subscription fee and allows for 25 commission-free trades, which creates "incentive alignment."
"[I] think because we've all learned over the past months and years, unfortunately, free trading isn't really free. It comes with a lot of conflict, and a lot of these brokerages, which rely on payment for order flow unfortunately have an incentive to direct users towards riskier, penny stocks and options, implicitly or explicitly. So, the brokerage model that we have with the subscription really does align the incentives with our community," George added.
Initially founded in 2015 as Nvstr, the brokerage app rebranded last month as Tornado and announced a $10 million seed funding round led by former professional baseball player-turned-investor Alex Rodriguez, billionaire e-commerce entrepreneur Marc Lore, Barstool Sports founder Dave Portnoy, and New Enterprise Associates managing general partner Tony Florence. George noted that the seed investors bring a common thread of a "real passion for advancing financial wellness and investor education."
The proceeds from the seed round will go toward "scaling the platform tremendously in terms of the community" and "staying laser-focused" on the mission of "helping people take that next step in their journey towards becoming a better investor."
So far this year, George said Tornado has seen "a huge acceleration in growth and engagement," with a 68% increase in engagement rates on the platform.
"A lot of that I think is really telling of the appetite out there for content and community that helps you sort of take that next step in your journey towards becoming a better investor," he added.
Julia La Roche is a Correspondent at Yahoo Finance. Follow her on Twitter.