Jon Stein

Jon Stein

Founder and CEO, Betterment

Jon Stein launched the digital-advice provider Betterment six years ago to offer average investors access to first-rate, affordable financial advice because, in his view, most traditional financial professionals didn’t care about them.

With degrees from Harvard and Columbia Universities, Mr. Stein, 37, has grown the robo-advice platform into a business with $6.2 billion in assets under management. In addition to its work with retail investors, Betterment today has divisions that serve retirement plans and financial advisers.

The firm has seen lots of competitors emerge, the most challenging of which are digital offerings from industry stalwarts like the Vanguard Group Inc. and Charles Schwab & Co. Inc.

But Mr. Stein is holding his own by continuing to innovate in his business, which aims to serve the masses by putting fiduciary advice first.

InvestmentNews: When and how did you begin investing?

Jon Stein: When I graduated from college I took a little bit of graduation money and started investing on my own. I opened a series of different accounts, maybe seven different brokerage accounts over the years. I was really frustrated that none of them did things the way I wanted them done for me. There was a lot of manual work, a lot of my time going into managing my portfolio, and it seemed like someone should build a service that did all this manual work for me. In talking to peers, a lot of them were finding the same frustrations.

IN: How has Betterment changed the financial advice industry?

JS: We’ve made investing smarter. We have made it such that people can invest and pay less in taxes than they would otherwise if they were doing things on their own or doing things in the traditional way. We have paid attention to these clients who have been ignored by the traditional financial services firms and given them the tools that previously were only accessible to the very wealthy. Tax management is a great example of those tools.

We’ve also made it more seamless and efficient for them to manage their accounts — everything from sign-up to funding to setting up goals to managing their money over time. We help our clients manage everything in one place. And we’re an independent adviser, first and foremost. We lead with that fiduciary relationship with our customer. Everyone else is either a mutual fund company or a broker. We are changing the financial industry because we’re starting with advice. We believe that advice is the future of all financial services.

IN: Will the lines between robo-advisers and live advisers blur?

JS: I think those lines are already pretty blurry. The whole concept of the robo-adviser was a way for the incumbent firms to paint us with a brush and to say, ‘Don’t bother looking at that thing, stay with us, you can never trust a robot.’

The truth is they don’t care about you and they’ve been using all kinds of technology to manage their practice more efficiently for years. They just don’t have what we have. They don’t have the sophisticated and efficient investment management technology that we have. They are trying to get you to ignore it by calling it a robo-adviser. We already offer the smartest advisers: We have certified financial planners on staff who will talk to our customers. We can refer you to dedicated advisers if that’s what you’re looking for. I’d say that line is already blurred.

IN: What’s the biggest challenge for digital-advice platforms today?

JS: How to build trust with our target customers. What we don’t have is the scale and the distribution of the large incumbents like Fidelity and Vanguard. They are sitting on millions of clients and not doing particularly well for those clients. They don’t care about most of those clients; they care about the really rich ones among those clients. Yet they have this large installed base, so building awareness of what we’re doing is a challenge.

IN: What advice do you offer people with their own budding fintech businesses?

JS: I give them the same advice that I got when I was starting out, which was to make it real and make it real as quickly as possible. Try to make it tangible, not just a concept of how you’re going to build something. Even just making business cards, all that kind of obvious stuff makes a business real and gets you one step closer to achieving your mission.

IN: What’s your biggest outside interest or distraction from work?

JS: When I’m not working at Betterment I’m usually hanging out with my kids. I have two young daughters, one who is 7 months and the other just over 2.

– Liz Skinner