A Simpler Way to Invest
Jon Stein joins Andrew Ross Sorkin for CNBC Squawkbox Disruptor Series.
ARS: We’re continuing our disruptor series now with an app and website that helps you make money and was awarded the title of best start-up in New York. Jon Stein is the co-founder and CEO of betterment personal investment company that blends the convenience of online banking with the high returns of stocks. good morning to you.
JS: Good morning. Great to be here.
ARS: So, Jon, explain to the viewers who may not be familiar, what is your site and company do?
JS: Betterment is a better investment. we’re reshaping the investing industry, and —
ARS: what does that mean?
JS: Which is what we’re trying to help give our customers better control of their money and their lives. We give them what they want. Which is a great return, great customer support, and transparency. And we do all of that efficiently because we have technology and automation.
ARS: So I’ve been to the site, and I was sort of tooling around trying to figure it all out and figure out what to do. The idea is that you’re offering what seemed like very low-fee money management, but I’m trying to understand what you’re investing the money in and how it works exactly. Give us an example.
JS: That’s right. It’s very low fee. and we’re investing in ETFs. We have essentially two options. Like a stock portfolio and a bond portfolio. And we’re doing this. So the whole thing is curated. it’s an advised investing solution. But we’re very transparent about what you’re investing in.
ARS: If I have ten grand or 100 grand to invest with you, and I call you up, I go online, I hook my checking account up, I wire you the 100 grand, what happens to the 100 grand?
JS: So, that 100 grand is seamlessly, instantly, invested for you in a basket of eight ETFs. and the mix of those ETFs selected based on your goals. It’s personalized for you. You use our website and the tools there to tell you how much you should invest and exactly how you should invest it and then we automate everything else. you can have automatic deposit going from your checking account. Automatic reinvestment of your dividends.
ARS: How is this different than — than an e-trade, for example?
JS: So, E-trade might be a competitor. But e-trade is this old-fashioned account. This is the next generation of investing. that automates all of this good behavior for you and guides you to better decisions. E-trade doesn’t do very much in the advice realm and they charge you for every trade.
ARS: What happens if your advice is no good?
JS: So our advice is really the textbook, classic, you know, efficient markets, and broad diversification, steady, long-term wins the race. It’s what’s proven over the long-term to be the best advice for most savvy investors.
ARS: How much money you got under management now?
JS: So we have about $100 million under management but we’re growing at about 20% a month. Hmm.
ARS: Not bad.
JS: Yeah, it’s good.
ARS: How old are you, can i ask?
JS: I’m 33.
ARS: You’re 33. When — how did you start the company? Where did you get backing? Where did you get the idea?
JS: So, my background is in investing and banking. I work for many big institutions. I studied economics at Harvard. I had a CFA. I went to business school at Columbia. I’m super trained in investing and was working in that space. But I found it hard to invest myself, and I had many peers, bankers, doctors, lawyers, et cetera, who had the same frustration. It was a little bit like I’d been trained to be a race car driver but I was afraid to drive on city streets because the options were so bad out there. So i decided the only way to fix this industry was to build something myself. And we have Bessemer Ventures and Menlo Ventures, two great firms among our backers. Along with angel investors and they share our long-term vision for this company which is to help give Americans a better way to invest.
ARS: We thank you and wish you a lot of luck. Sounds like a very cool project. Thanks very much.
JS: Thank you.