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Digital Wealth Management
Jon Stein, Betterment (cont.)
How do you balance any competitive tensions both serving consumers directly and providing a platform for
other financial institutions like Fidelity?
We really don’t see any competitive tensions; we’re agnostic as to where the consumer goes. We’re happy to bring consumers
onboard directly, but we also see the value that advisors bring, particularly in helping make decisions among a complicated financial
profile. Betterment’s software brings great benefits to the general consumer, regardless of whether or not they use Betterment
through the platform or through an advisor. Our tools enable advisors to gain efficiencies in their own practices. We can help them
automate components of their services, which may have been super manual in the past – tax loss harvesting is a great example of
this. We can also help advisors to have more time to focus on actually interacting with their clients and to potentially use our tools to
enable a segmentation strategy. Betterment can help advisors extend their reach and serve more clients without adding substantial
workloads.
What consumer segments are you specifically targeting?
Core clients that we are targeting are people who want to have their financial lives managed online. Obviously, Millennials are going
to be a big part of this, but Betterment is ultimately targeting all demographics. A fact that may be somewhat surprising to outsiders,
30% of our customers are people 50+ years of age and we are seeing huge growth here. Given this expanding segment, we
continue to build out more robust retirement-specific services.
Do you plan on adding more human advisors over time?
We view ourselves as a technology company and don’t envision a time when we would build out a call center with a large staff of
human advisors. We have the institutional business for advisors. We do offer individual consultations once a year for clients with
$500k and above with us to be sure that we are properly in touch regarding their full financial picture to avoid things like wash sales,
but this is a small segment of our customer base. On staff, we have numerous professionals, CFAs and finance people doing the
modeling, portfolio construction and stuff, but no true human advisors.
What marketing channels are proving most effective for your business?
We get about 30% of our business from referrals – friends and family encouraging others to sign up, which is pretty incredible. We
do some television advertising, which has been successful. We do a fair amount of digital marketing including social media and
SEO. We also benefit from our general PR outreach and blog.
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