EPISODE
225

Jon Stein

CEO of Betterment

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In my Ask Farnoosh episodes I received a number of questions from you about financial advisors: How do I know if I’m ready to work with one? How much do they cost? Is it worth it?

I also receive a number of questions about the growing market of “robo advisers” or online advisors that offer more affordable financial planning. You don’t get to meet with an advisor one-on-one but you receive a virtual plan that addresses your goal. And many people are participating. Still many are not sure if this is right for them.

That’s why I’ve invited today’s guest…co-founder and CEO of Betterment, Jon Stein.  Betterment launched in 2008 and is, as the company says, “a smarter automated investing service that provides optimized investment returns for individual, IRA, Roth IRA & rollover 401(k) accounts… Through diversification, automated rebalancing, better behavior, and lower fees, Betterment customers can expect 4.30% higher returns than a typical DIY investor.” The company also practices automation and passive investing. It’s free to sign up and as your account  balance grows, so does your monthly fee…But it is significantly cheaper than a traditional account fee.

Back to Jon, he comes from a background in financial services and is a graduate of Harvard University and the Columbia Business School.  In addition to holding Series 7, 24 and 63, he is a CFA charterholder.

Three takeaways from our interview today include:

  • Why Betterment? Why not work with a financial advisor one-on-one?
  • What the naysayers say about the robo-advising?
  • Jon’s biggest money mistake…it involved Enron. Remember Enron?

If you would like to learn more visit  www.betterment.com or follow Jon on Twitter @jonstein.

One of my favorite quotes from our interview: “Invest early, as early as you can and automate as much as you can.” – Click to Tweet

  • Antonius Momac

    Farnoosh, I don’t know about betterment. I’ve used them, and set up a year long experiment:

    For Betterment, Sept 2013 – Oct 3, 2014 with a withdraw on that date. I received 2.8 % return, as per their site performance calculation.

    During that year I moved a few times between 50/50 portfolio and an 80/20 for a year. So I defiantly did something wrong. (ie didn’t buy and hold)

    It was about 20K in total, but I think I started small, then ramped up, and then settled in with a weekly addition of 40-60 dollars. I figure I’d do that dollar cost average deal and try out their tools.

    But certainly, timing could have been a big factor.

    I also have a vanguard account (IRA) with everything in a 2045 target date retirement fund.
    for a similar time period:

    Sept 2013 starting balance was 28,511.85
    Sept 2014 ending balance was 33,189.72 (and this was a losing month)

    No money was added by me in this time period to the Vanguard account (STUPID ME!)

    the difference is (end bal – strat bal.) 4,677.87 or about 16.41 % (return)

    Not sure what the fees are, but betterment invest in funds with fees, plus adds their fees on top.

    Even if I did something wrong. More than a 13% difference!
    So, I went back to Vanguard. Saved the betterment fees.

    Good luck, and remember, Nobody cares about you money as much as you do!!!