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Are Robo-Advisors the Enemy? With Jon Stein from Betterment

August 28, 2015

Robo Advisors

This week, the Money-Guys have brought on special guest Jon Stein, CEO of Betterment, to pick his brain about the robo-advisor industry.

While it might seem strange to have a “competitor” on, Jon and Brian had similar reasons for starting their businesses: to provide financial services to those who need it most in an accessible way.

Jon doesn’t view Betterment as an enemy to advisors, either. He sees it as a complement to what advisors are already offering. That’s why, since the beginning of the year, Betterment has offered institutional services to financial advisors.

Beyond that, most of Betterment’s clients are DIY investors — and only 17% of users logged in this past weekend amidst all the market volatility. Jon attributes this to the fact that Betterment clients know better. They’re in it for the long-haul and have accepted the ups and downs for what they are.

The Future of the Financial Advice Industry

Brian and Bo enjoyed getting Jon’s insights about the importance of technology and what the future of robo-advising is as well. Betterment has become a leader in the industry because of its focus on technology and clients. User experience is something Jon takes seriously — Betterment aims to provide fast service in every aspect of the process.

Brian agrees with this approach, saying keeping the client happy should be every advisors biggest concern, especially with the level of competition these days. Brian argues virtual advisors are an even bigger threat to traditional advisory firms than robo-advisors are.

How Betterment Offers More Than Technology

Speaking of traditional firms, when asked about Betterment’s competitive advantage, Jon remarks that technology and diversity are what sets its services apart. While everyone is a big fan of Vanguard, it’s known for its low-cost index funds.

It’s not known for advice (or friendly user experience). Betterment doesn’t manufacture funds, and is better suited to giving objective advice about investments than the bigger brokerage firms.

Betterment is also the only true robo-advisor that offers complete automation for clients. Advice is given automatically based on searches or questions users have, and portfolios are managed without users having to lift a finger. This allows for a better user experience, and it’s no surprise Betterment has the lion’s share of users out of all the other “robo-advisors” out there.

What’s the biggest risk Jon’s concerned about? The availability of talent. Betterment has assembled a great team, but as the company continues to grow, Jon hopes he can hire the “right kind of people.”

Whether or not you’re keeping up with the evolution of robo-advisors, all financial advisors can take away some key points from this podcast. Jon is a wealth of knowledge when it comes to the business, and Betterment isn’t going anywhere anytime soon.

If you enjoyed this show, don’t miss out on the full library of content from The Money Guys. Click here to learn more and join the community!

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