Jon Stein – The State of Automated Investing

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is a principal and portfolio manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
My guest today is Jon Stein. Jon is the founder and CEO of Betterment, which as a leading robo-advisor, manages about $5 billion for more than 175,000 clients.
Jon and I discussed the challenges of getting young people to invest, Betterment's recent foray into areas like the 401k market, and how Betterment works with financial advisors. For show notes on this episode, visit investorfieldguide.com forward slash Stein. And now, please enjoy my conversation with Jon Stein.
Thanks, Jon, very much for being here with me today. Maybe you could start since most of my listeners will be familiar with Betterment, but some won't. Maybe you could start by just describing briefly what you do as if you were talking to, say, a cousin that doesn't know anything about Betterment.

**Jon Stein** (2:10)
I'd probably first ask my cousin what she does with her money today.
I always like to start with that because people have so many different points of view on financial services. If there was no answer, if I was talking to a group, I would say we are an investment management service. Our mission is to make our customers' financial lives better by helping them make better financial decisions. Customers come to us, they tell us about their goals and their financial needs based on what we hear from them. We build portfolios for them, we manage those portfolios over time to reduce risk, to reduce taxes, to coordinate across their different types of investment accounts and get them a better net return at the end of the day and help them achieve their goals more quickly.

**Patrick O'Shaughnessy** (2:53)
So one of the things I'm most fascinated about because I generally failed at this same task is how you get to young investors. So I wrote a book called Millennial Money and what I found was people love the message, nod their head and then do nothing.
Mostly because you're talking about a goal that in most cases, talking about retirement is decades away and that's just not how people are wired to act. Maybe they'll nod their head, but they won't do anything. So thinking about customer acquisition, especially in the millennial generation, what have you learned? What's the secret? Is it even possible to get younger people to act with such a distant goal in mind?

**Jon Stein** (3:31)
It's funny, I feel your pain and I sometimes say that our biggest competitor is inertia. It's so hard to get people to act. It's so hard to get them to pay attention to their money because everyone's so busy and has all these other things that they want to do, which is part of the reason that I started the company, right? It's hard to get time to think about your money, to rebalance or to tax manage it or to do the things that you know you should be doing. Many of us just want to kind of put our heads in the sand or, you know, do something, anything other than actually attend to our finances.
To make it accessible to people and to get people over the hump and actually get started, I knew that we had to make it as easy as possible. We had to make it really frictionless. And so from sign up to funding to setting up your goals to coordinating across all of them, we've made it seamless. We've made it efficient. It takes less time than it does anywhere else.