Betterment CEO Jon Stein spoke to some 2,000 advisors and other financial professionals Tuesday morning at Inside ETFs 2015 in Hollywood, Florida, and immediately separated himself from the “average advisor.”
“This is early for me,” said the founder of the robo-advisor, who is in his 30s. “In our office, we get started at around 10 a.m.”
Next, he tried to warm the audience to Betterment. “There is a sense of competition between robo and human advisors,” said the New York-based entrepreneur. “I think that is a false competition.”
Later in his talk, though, Stein made it clear that the firm is likely to put pressure on custodians and broker-dealers working with independent advisors, like TD Ameritrade and Schwab.
“By 2020, Betterment Institutional will be ‘the full-service hub’ for a new kind of advisor,” he explained. It plans bring on advisors who want automated tasks, like tax-loss harvesting and rebalancing in a paperless system, at a cost of roughly 25 basis points.
“The cost of trading has gone to zero, and the cost of diversification is essentially free,” he added.
This means, for advisors, that the business they need to build is “totally different than that of 10 to15 years ago,” Stein states. “Advice is more important than ever, both robo and human, but the tools are different. We are a great do-it-yourself option.”
Clients who bring assets to Betterment “are coming to us from self-directed [platforms] and almost never from advisors,” he explains.
While many advisors work with clients that have $2 million or more of assets to invest, “We see our core clients as one with a household at under $2 million,” the Betterment executive said.