Betterment Interview With CEO Jon Stein

jon stein bettermentYou may have seen ads around this blog before.  In fact, I have one up on my sidebar right now.  Betterment is one of the few companies that I support and recommend all my readers to utilize in their total financial portfolio.

I was approached a while back to interview Jon Stein and took the opportunity to do just that!  I had the chance to ask some deeper questions than usual.  Jon Stein was a pleasure to interview and I love his passion for helping average Americans!  But first, here’s a short snapshot of his background from

Jon is the Chief Executive Officer of Betterment, which he co-founded in 2007. Prior to creating Betterment, Jon spent his career developing better financial products, platforms, and investment strategies for international banks, brokers and other financial institutions.

At First Manhattan Consulting Group, he counseled a number of the world’s most prominent financial institutions on issues ranging from product design to strategies to mitigate the risks inherent in their products. Jon is a Chartered Financial Analyst (CFA), a Series 7 and 24 Registered Securities Representative, and a graduate of Harvard University (Economics) and Columbia Business School.

He has appeared on NBC, Bloomberg, and Fox and quoted in the New York Times, CNNMoney, and Investment News. His interests lie at the intersection of behavior, psychology, and economics. What excites him most about his work is making everyday activities and products more efficient, accessible, and easy to use.

Hopefully this Betterment interview gives you some more insight as to what Betterment is about and how their services can benefit you and your retirement goals.  Sit back and enjoy the following interview!

Hi Jon, thanks for this opportunity to interview you! I’m a huge supporter of what you’re doing over at  But first, tell us your quick background story. How did you get to where you are today?

At Harvard, I studied psychology and economics. So I’ve always been passionate about helping people make smart decisions with their money.

When I graduated, I had a little cash and I wanted to invest it. My first purchase? Enron. I knew better, and still I didn’t follow the best teachings of modern finance â“ diversifying, re-balancing, indexing.

Then, I spent years working as a consultant for big banks, and found that typical financial products were optimized for corporate profits, not for real people’s goals. Friends would ask me, What should I do with my money?❠Seeing no good answers, and knowing that Wall Street was not looking out for the average individual investor, I felt I had to create a better way.


What is the history of How did it start and what has the journey looked like up to this point?

In 2007, I left my cushy banking job and enrolled in the MBA program at Columbia. I knew I wanted to start a company â“ Betterment â“ I had the name already â“ but the details were still taking shape.

In August 2008, I brought in a few great colleagues who were experienced in financial services, technology, and law. So began our 2-year journey through regulators and technology. We actually finished our site a day before we launched to the public â“ it was down to the wire. We officially launched at Tech Crunch Disrupt in May 2010, where we were voted Best New York Start-Up.

Through my education and in working with large financial institutions, I learned a few things, one of which was that I was no smarter than thousands of others looking at the market, and I didn’t have better information. I was best off applying the concept of Modern Portfolio Theory â“ that there’s no better portfolio to own than the market portfolio â“ than trying to beat the market. So the principles of Betterment were in place long before we had a product.


What is the vision for Betterment?

Betterment’s vision is to make smarter investing accessible to hard-working, busy people like you and me â“ to make Wall Street work for the rest of us.


What is the structure of Betterment and why do you recommend it to the average American?

Betterment is smart investing made easy. We blend the simplicity of an online bank account with the higher long-term returns associated with investing in stocks and bonds. You can quickly and easily transfer money from your checking account by linking it to Betterment electronically. There are no minimum balances, no transaction fees, no holding periods, and no hidden costs. You’ll just pay a low annual management fee of 0.3% â“ 0.9% of your average balance.

As far as your portfolio, you’ll be invested in a blend of stock and bond Exchange Traded Funds (ETFs). With stocks, you’re invested in index funds that are chosen to reflect the U.S. economy as well as some select markets around the worldâ”it’s like owning a little piece of every company in America and then some. Your bond investment is made up of U.S. Treasury bond ETFs that are backed by the U.S. Government. You get to choose a blend that gives you the broadly diversified portfolio that’s right for you. We’ll also automatically rebalance the allocation you set in order to maximize your returns.

The coolest thing about our structure is that we are both a broker/dealer and a registered investment advisor. Because of this we can provide people with sound financial recommendations and the tools to implement those recommendations all in one platform. In just a few clicks of the mouse, your assets can be broadly diversified and invested toward your long term goals. And each of your goals can have a different plan. You set the timeline and asset allocation for each, and we advise you on how much to invest to make your goals reality. Whether you are investing for retirement or saving for a house â“ or both â“ we have you covered.

The other awesome thing is how efficient our platform is, since it’s all automated and built on the latest technologies. We pass the savings on to customers.

It’s the best way to invest â“ the highest risk-adjusted returns for the lowest cost. You save a bundle versus paying brokers to do all this stuff for you, and you don’t pay some guy in a suit to give you so-called advice.❠You invest in a smart way with tens of thousands of people like you. What could be better?


What are the choices for a typical investor?  Can you give us a brief synopsis of how a typical investor would go about starting an account and getting started?

Starting an account at Betterment could not be simpler (or faster). All you do is link your checking account, set your asset allocation using a slider, and then relax and let your money grow. There is no minimum balance and no paperwork to fill out. In about 5 minutes you can start your journey to become a better investor.


Is there any catch❠in terms of fees or trading costs?

At Betterment there are no transaction or trading costs and no hidden fees. All you pay is a low annual management fee of 0.3% to 0.9%, depending on your balance. For a balance like $100,000, the annual fee is $750, which is far less than folks pay for in-person advisory solutions, and all the execution is included.


For the readers out there, what type of protection do you provide investors in terms of insurance?

Betterment is an SEC Registered Investment Advisor, and Betterment Securities is a broker-dealer regulated by FINRA and the SEC. The securities in your account are protected up to $500,000 by SIPC. Betterment is simple and transparent. Your money is invested in well-established funds, chosen for their good management, efficiency, and long track records.


What mistakes do you see investors make and how does Betterment help investors avoid these mistakes?

Some common mistakes that come to mind are buying when the market is low and selling when it’s high, remembering our winners and forgetting our losers, and failing to adhere to good investment practices like re-balancing and dollar cost averaging.

Through our platform, we encourage our customers to invest for the long term. Accounts are based on goals and we ask for specific time lines to those goals. By focusing on long term investing, we steer customers away from trying to beat the market and from those irrational daily impulses. In addition we automatically re-balance all customer portfolios every quarter or any time an asset allocation moves 5% away from its target. And finally, we offer automatic deposit which allows customers to take advantage of dollar-cost averaging. By making automated, regular contributions to your Betterment account, you avoid costly and common timing mistakes.


Say, I open an account and start investing with Betterment. How do I adjust my asset allocation or is this automated?

Adjusting your asset allocation is extremely simple. Within your account you will find an asset allocation slider. You move the slider between stocks (more risk) and bonds (less risk). We encourage you to set the allocation you desire to start, and then sit back and relax. Frequent asset allocation changes typically don’t lead to higher returns. We regularly check to make sure your allocation stays on target, and automatically re-balance quarterly as well as any time it strays more than 5% away from that target.


With many people on I-phones and android devices, is Betterment integrated electronically to make balance adjustments or receive notifications?

We have an iphone app so you can do all the cool things you do on the computer right from your mobile device. You can add and withdraw money, set your asset allocation, and check your account activity right in the palm of your hand.


I’ve heard you use the saying social finance.❠What do you mean by that and what does it mean to investors?

At Betterment we are a community of savers invested in the broad stock market together. We provide tools such as peer comparisons to help each other make the right choices. You’ll be able to see for yourself how others like you (in your same age bracket, earning the same income, and with the same gender) are investing so you can compare and learn as you go. So if you aren’t alreadyâ”you’ll soon be an investing wiz.


Does Betterment offer training and education resources?

Our website provides a wealth of information about investing and why we’ve chosen the Betterment portfolio. If you aren’t familiar with ETFs, you can access our FAQ and get all of the information you need. Or perhaps you are an active investor who wants a little bit more knowledge about our portfolio. You can find a downloadable prospectus for each fund right on the website. Most importantly, we are always available to take customer calls and emails. We have a devoted customer service team, and we make sure that everyone at Betterment interfaces with our customers. If you have a question about your account, you might end up chatting directly with me!


What type of growth have you seen with Betterment and where do you see Betterment 10 years from now?

I am so happy with the growth Betterment has experienced thus far. We have more and more customers every day, and in just 6 months we have tripled the size of our team and quadrupled the size of our customer base! In 10 years I hope to see Betterment providing ideal investing solutions for tens of millions of people like you and me.


Jon, thank you so much for your time!  To end this interview, I have one last question for you.  What one piece of advice would you give my readers to be successful with their investments and retire without money worries?

Thank YOU, Jon. It’s a pleasure. The one piece of advice I can give your readers is to start now. Did you know that if you start saving for retirement when you are 25 instead of 35 you could end up with twice as much money?

It is important to focus on the long term, and if you want to maximize your investment returns and retire with cushion, invest in a diversified, liquid portfolio. Set it and forget it, and you will see your money grow.


Want to find out more?

I’m sure you’re super interested in what Betterment has to offer.  Who knows, you may even be starting the journey of saving for retirement and don’t know where to invest?  Betterment is the place to go if you’re feeling lost.  In fact, they are offering a $25 signup bonus right now just for singing up!  you can click the banner below to go straight to the bonus!

If you’d like to know more on their services, I wrote a review a while back explaining a little more in depth about what Betterment provides.  You can access that interview here.

Photo by TCDisrupt