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Betterment's Story

A Short History of Investing and Technology

Looking back at the recent history of investing and information technologies, we can see how technology has influenced the way people manage their money.

Articles by Jon

By Jon Stein
CEO & Founder, Betterment  |  Published: August 11, 2014

Technology and behavior are intricately linked in every realm of life.

We are building on prior innovation and applying technology in new ways to change the way money is managed so that ultimately people have better outcomes.

Every day now, there is another story about the rise of automated investment services. Betterment is usually listed first, which we are very excited about. Please keep them coming.

Some of these articles are useful to those curious about the emerging entrants or the relative advantages. Most of them repeat the same information on rapid adoption (no surprise), “robo-advising” as a threat to traditional advisors (it is not), and how the financial services industry will respond (by building or buying the tech–it’s inevitable).

However, these stories can feel nearsighted, to me, or sensational in the way they report about the emergence of our industry. Too few take what I would call “the long view,” or historical perspective of how investing and technology have evolved for consumers in the last few decades.


The long view is that automated investment services, which offer sophisticated ways to simplify and automate your portfolio and/or investing strategy, are engineering an inevitable transformation of the entire financial landscape. Why? Because the evolution of technology always shapes our world.

Technology is an important part of the context in which we live.

Right now I am reading David Byrne’s terrific new book How Music Works. For centuries technology has changed the ways we create and consume music, Byrne writes. It has been the driver behind new kinds of venues, music composition, new instruments, and recording systems. This story repeats in every realm of life: media, food, transportation, and now, money.

Tide Change for Investors

If you look back at the recent history of investing and information technologies, we can see the ways in which technology has influenced the way people are managing their money.

For example, with the rise of personal computers in late 80s and early 90s, discount brokers and online trading platforms emerged. Better computing and information flows ushered in high-frequency trading, forex shops, and hedge funds. Broader applications of technology on the backend of brokerages created new products like target-date funds and ETFs. All of these developments have nudged customers into different ways of investing.

Now, Betterment is leading the next technology evolution with automated investment. We are building on prior innovation and applying technology in new ways to change the way money is managed so that ultimately people have better outcomes.

We start from a place of alignment with the customer and then ask, how can we use technology to improve their experience? Through smart user-design and customer development, we work with individuals to better address their investing needs.

The creation and popularity of index-tracking ETFs has been essential to our success as an automated investment service, as is cloud-computing, like Amazon Web Services. ETFs allow us to put together incredibly low-cost, liquid portfolios and improve tax efficiency — while cloud-computing allows our engineers to build, model, and test new trading platforms in cost- and time-efficient ways.

All of these benefits are then passed on to customers through lower costs, optimized investment vehicles, and seamless user experience.

Welcome to the new era for investing that improves the way all Americans can grow their money — and provides more certainty that they will actually reach their financial goals.

Even though automated investing and financial advice are still in the early days, we have a feeling of inevitability and momentum, which — as an industry — we lacked even as recently as two years ago. Personal Capital, Future Advisor, LearnVest, SigFig, FeeX, and more — these are all interesting tech-based companies and together, we’ll help millions of investors.

This post first appeared on Wired’s Innovation Insights blog.  

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