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1 November 2016 Multimedia

The State of Automated Investing, with Jon Stein

  1. Patrick O’Shaughnessy
  2. Jonathan B. Stein, CFA

Welcome to Patrick O’Shaughnessy's new podcast series, Invest Like the Best.

Would you be comfortable with a robo-advisor running your entire investment portfolio?  That’s the hope of our guest this week, Jon Stein, founder and CEO of Betterment.  Betterment manages $5 billion dollars for over 175,000 clients.  Patrick and Jon explore the challenge of getting young people to invest, Betterment’s recent foray into areas like the 401(k) market, and how Betterment works with financial advisors.  If you’re unsure about robo-advisors, this conversation will make you better understand what they can do for you.

Books Mentioned

Links Referenced

Show Notes

 1:55 (First Question) – Jon explains what Betterment does and how it serves individual investors.

2:55 – Patrick asks Jon about the challenge of acquiring younger investors and getting them to invest. Jon explains why this challenge forced them to make the platform as efficient and seamless as possible.

3:04 – Millennial Money: How Young Investors Can Build a Fortune – Patrick O’Shaugnessy

4:52 – Jon explains the history of Betterment and how his presentation at Techcrunch in 2010 helped to put their company on the map.

5:57 – A look at the most common Betterment users and who it helps best

6:51 – What it’s like to go through the setup of the program and what goal most people are using the system for

7:54 – A look at Jon’s history that led him to creating Betterment

9:47 – Jon explains that Betterment is a tech company that is solving customer problems in investing and how the company is comprised of a healthy mix of product managers and investment professionals.

10:34 – Exploring the investment portfolio choices and ETF’s that Betterment provides to its customers and why there seems to be a focus on value.

12:28 – Will Betterment get into the business of creating its own ETF’s or investment funds?

14:27 – Why you can never promise to have just one investment strategy, but why it’s so important to remain diversified

15:45 – A look at some of the new spaces that Betterment is expanding into, starting with the launch of their own 401(k) and their partnership with Uber.

15:56 – When everyone says a business is tricky to get into, Jon sees it as an opportunity

18:55 – What happens when an employer looks to use Betterment’s 401(k) process

20:50 – Looking at why Betterment gated people from trading during Brexit and why Betterment focuses on minimizing the impact of volatility to ensure everyone gets a fair price on their trade.

21:48 – How do we expect Betterment customers to respond during the next bear market.

23:30 – How does Betterment serve financial advisors as a technology support tool

25:30 – Betterment’s new relationships with Vanguard and Goldman Sachs, to give people more options.

27:07 – A look at the management of Betterment, their values, and how they explore new potential business ventures.

28:48 – How do you decide what projects get resources and who decides when to move forward or pull the plug on something.

29:49 – Looking at the future of robo-advising and whether or not some of these first generation features will become complimentary in the next 5-10 years.

31:05 – A look at Jon’s family and what he expects his children will be doing when they get ready to start saving money for retirement.

32:46 – Exploring the most memorable day in Betterment’s history, which Jon says is the launch presentation he gave at TechCrunch.

34:48 – What were some life changing books.

34:58 – Sapiens: A Brief History of Humankind – Yuval Noah Harari

35:06 – Guns, Germs, and Steel: The Fates of Human Societies – James Diamond

35:15 – Sex, Evolution and Behavior – Martin Daly and Margo Wilson

35:35 – The First Tycoon: The Epic Life of Cornelius Vanderbilt – T.J. Stiles

36:57 – Patrick asks Jon about his daily systems, which Jon says includes getting home every day so he can read his daughters bed time stories

37:31 – Jon says prioritization is crucial professionally

37:58 – Jon is given a chance to tell people to explore robo-advisors if they’ve never checked it out. 

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