Inside Betterment with Jon Stein

Betterment CEO Jon Stein gives us a  behind the scenes look at how the company operates and makes your money work for you.

 Betterment is an automated way to invest your money based on your goals and time frame. Answer a few simple questions and Betterment will set up a diversified portfolio that is managed for you.

 After studying economics and human behavior, Jon started his career consulting for banks.  He saw that they didn’t care about customers and their products were almost designed to help people fail.  He experimented with several brokerage companies and couldn’t find what he was looking for.  So like all good entrepreneurs, he decided to make what he couldn’t find elsewhere himself.  A company that made it easy to invest and served the client, not the bottom line.  That’s how Betterment was born.

 A listener asked why Betterment is better than Vanguard given that Vanguard has better fees.  Betterment does some things that Vanguard does not.  Betterment invests in fractional shares, each time you deposit money into Betterment, your account is automatically rebalanced in order to lower taxes, and  Betterment does tax loss harvesting.

We advocate keeping your emergency fund in an investment account.  In Betterment, short term money will be invested more conservatively.  If you leave an employer who provided a 401K, roll it over into a Betterment IRA.  Many times, once you leave an employer, you will be charged a higher fee for the management of the 401K.  It takes about seven days to do a roll over with Betterment, the industry average is thirty days.

Jon sees Betterment moving into the same league as companies like Vanguard and Fidelity in the next ten years and managing over one trillion dollars.  And when that day comes, we’ll be able to say we knew him when.

The Betterment Experiment

Check out our experience using Betterment with our own money:

Show Notes

Betterment:  See for yourself what we discussed today.  Use this link and your first six month of investing are free.

Boulevard Unfiltered Wheat Beer:  A lively, refreshing ale sent to LMM from listener Drew!

Nudge:  Improving Decisions about Health, Wealth and Happiness: A new look at how we make decisions.

The Winner’s Curse:  A look at the difference between how people should act economically and how the actually act.

Thinking, Fast and Slow: The hidden things that influence the way we think and make decisons.

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