JON STEIN, CO-FOUNDER AND CEO OF BETTERMENT, TELLS HOW HE co-founded the company and built it into one of the fastest growing and most innovative investment firms in the country. It’s a great story about how a smart guy with a timely idea can marshal the resources and build a company that is reshaping how business is done in the investment world.

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Jon Stein

  • Co-founder and CEO, Betterment.
  • An engineer whose “polestar” is efficiency.
  • Interests lie at the intersection of economics, psychology, and design.
  • First stock pick–Enron. Fail! Taught him important lesson which helped lead to starting Betterment.

Steve’s Show Notes

  • Advisors, you need to really focus on adding value above and beyond the investment management piece. As Jon said, “I think the investment management piece has been heading toward a commoditization for a long time.”
  • Think the Robo Advisors are just a bull market phenomenon? Think again. Jon said, “I think that there’s a misperception that we are somehow more sensitive to the downside. I think that we’re actually positioned to grow even faster during a market decline as people get upset about other investments they have and start looking for something consistent, something reliable, something that takes advantage of the best investment strategies regardless of market conditions.”
  • Taking a cue from Carl Richards, Jon said, “We seek to get to behavior gap zero. Our goal as an advisor is to get people the actual returns they deserve,” (as opposed to less than market returns due to behavioral faults).
  • Are you asking your clients about their preference for the tradeoff between trading and taxes? You should after considering this gem from Jon. “Customers who see that they have a taxable gain before they make a withdrawal or an allocation change transaction are 60% less likely to make that transaction than people who didn’t see that data.” In other words, as Jon noted in the interview, more than half of investors wouldn’t make a trade if they knew the tax implication of making the trade.
  • Jon has huge goals for the firm and said, “I do think we’ll be a multi-trillion dollar asset management company.” Listen to the interview for Jon’s take on where that money will come from.
  • Betterment has interesting demographics. Jon said the average age of their customers is 36 yet 25% of their assets are coming from customers who are 50 plus. So advisors, if you want to prosper over the next 10 years, you have to implement a strategy to partner with firms like Betterment, create your own online service, or else face a tortured death.
  • Jon shared what tools Betterment is developing to make pre-retirees and retirees more comfortable with working with them, and here’s a hint—it’s something most financial advisors do as part of their value-added service. Translation—Betterment is rapidly adding services that investors normally turn to financial advisors for.
  • Betterment has a “negative churn.” Listen to Jon explain what that means.
  • In terms of staff who interact with customers on a day-to-day basis, Jon says Betterment typically runs at a ratio of about 1 client-facing staff per 10,000 customers. A traditional financial advisor firm has about 1 advisor per 150 clients. Think about the implications of that!
  • Jon shares the one thing that keeps him up at night and it should keep you up at night too.
  • You don’t become a fast growing company without having good management strategies and Jon shared some of the apps, strategies, and philosophies he uses to manage the firm.


– Thinking Fast and Slow (book)

– Greenhouse (software to optimize your entire recruiting process)

– Slack (a platform for team communication)

– Yammer (a private social network that helps employees collaborate across departments, locations and business apps)

– Reportive (automates the creation and distribution of operations management dashboards)

– Namely (manage your entire HR process with one integrated platform)

– Trello (visual way to organize anything with anyone)

– What exactly are robo-advisors, why did they steal the 2014 show and what will a 2015 repeat take? RIABiz

– April Rudin taxis in to Betterment HQ to see how the robo-advisor will fare. RIABiz

– How to hold 1,000 hands: Robo CEOs lay out a stark choice for traditional advisors at MarketCounsel Summit RIABiz

– Robo Advisors and real advisors will soon converge Belay Advisor

– 4 ways automation technology is changing the way RIAs invest Investment News

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