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Financial Industry

How the Future of Financial Legislation Will Empower Investors

Betterment isn’t just leading the way as the first automated investment service—we’re also supporting future legislation to improve our customers’ financial lives.

Articles by Jon

By Jon Stein
CEO & Founder, Betterment  |  Published: November 15, 2016

Betterment exists to improve our customers’ financial lives, which is why this past summer we shared what we’ve learned to support legislation that aims to help financial literacy and empowerment.

When we visited the Treasury for a financial literacy conference, we showed how our service helps people display good investing behavior and avoid common investing pitfalls.

At the White House, we discussed the importance of consumer ownership over personal financial data.

Sometimes the best way to fight for what you want is to show up and talk about it.

That’s why this past summer, I traveled to Washington, D.C., with Betterment team members.

We were there to support causes that are the very fabric of our company and cultural mission, and to help shape legislation that would empower investors and improve the retirement industry for our nation’s financial health.

Financial Literacy and Education

We started with the Department of the Treasury, where we attended an event hosted by the Financial Literacy in Education Commission, or FLEC. The heads and representatives of many congressional departments were there, from the Departments of Labor, Treasury, Social Security, Armed Services, Housing and Urban Development (HUD), and even Agriculture.

The common thread? We were there to discuss how our government could do better to educate citizens on having more financial security in retirement.

Retirement plans have changed in the past 30 years, from defined benefit to defined contribution plans, a change that results in more responsibility for consumers to make critical decisions for their own retirement security, according to statements by the U.S. Secretary of Labor Tom Perez. Yet, the financial education of Americans has not kept up, even with the efforts of government agencies and the private sector, Perez explained.

Perez also stated that Americans’ financial literacy was insufficient to meet their needs, even in comparison to other countries, and the efforts for financial literacy were important to ensure a dignified retirement as a critical pillar of middle class security.

The representatives then leaned on our panel for insights and solutions help to address these problems.

L-R: Center for Financial Planning (CFP) Executive Director and Board Public Policy & Communications Managing Director Marilyn Mohrman-Gillis, Morningstar Behavioral Economist Sarah Newcomb, and Betterment Founder and CEO Jon Stein

When asked about how to help people access financial advice and guidance, I made the analogy that if financial education is the map, then advice is the GPS directing you along the way. I also explained how automated advice is very cost-effective, and that our business charges customers for advice only.

We also talked about how we help empower people to make better financial decisions and display good investing behavior. We keep people on track to reach their investment goals, and help them avoid common investing pitfalls such as attempting to time the market, being under-diversified, and paying high investment fund fees. There’s simply a lot of interest in those themes and I was happy to share how Betterment is leading the way in changing the retirement industry.

Fintech and the Future

When the Betterment team visited the White House, I spoke on a panel for the Fintech Summit.

There was a consensus among the attendees that the future of financial services is more advised and automated—I was happy to see the nodding of heads in the room when I stated this.

When asked if they’d ever heard of Betterment, all of the people in the room raised their hands—something I’d never seen before. Usually it’s closer to 10% of the room—and I would have been happy with just 30%—but this made me realize that more people in Capitol Hill know about the role and importance that fintech plays in helping to improve people’s financial lives.

For this particular panel, the focus was on data security. Just like the views expressed by Richard Cordray, the Director of the Consumer Financial Protection Bureau (CFPB), I’ve been a staunch defender of people having ownership over their own financial data.

Just like at FLEC, we talked about financial empowerment and automation, and how we’re helping people make better investment decisions, encouraging them to display better investor behavior—there’s simply a lot of interest in that theme.

There’s a lot of awareness and support in the White House and in Washington, D.C., about what we’re doing. They wanted to understand how they could be helpful to us.

In closing, the Betterment team and myself were truly humbled to be invited to speak about how we’re leading in the financial empowerment of people’s lives. We look forward to helping shape future legislation as called upon when it comes to instilling good financial and investor behavior for everyone.

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