How the Founder of Betterment Turned His Low-Fee Idea Into an $8.5 Billion Business

"It's never a good idea to get comfortable."
How the Founder of Betterment Turned His Low-Fee Idea Into an $8.5 Billion Business

Jon Stein is the founder and CEO of Betterment, the first independent online financial advisor. Stein started the history-making company after years of consulting for Wall Street’s biggest financial institutions, with a mission to help people maximize their money through long-term investing, tax loss harvesting and low fees. According to Crunchbase, Betterment has secured $275 million in funding — and in 2017, Forbes reported that the company’s assets had skyrocketed to $8.5 billion.

In this installment of GOBankingRates’ “Best in Business” series, which sets out to discover what makes the people behind top innovative companies tick, Stein shares why starting his company during the recession was actually a good thing, the importance of knowing when to ask for help — and ways that you can find (or build) your own dream job, too.

When did you know you had to start this company?

The industry’s long-term disregard for customers’ desires has damaged the idea that financial institutions are stewards of their customers’ money and has instead given people the notion that financial service companies are motivated exclusively by profit. Working as a consultant for the country’s largest banks and seeing their inner workings firsthand, I knew that the industry needed to change. The ethos of most of the large incumbents has been making money off of their customers — not making money for them.

I wanted to create a company that put people before products, that put customers’ interests before all else. I started Betterment to reinvent investing — to help people live better, healthier, happier lives.

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What were your biggest fears about launching your own business?

    I founded Betterment during the recession in 2008, one of the country’s largest financial crises. My biggest fear was that I was building a product during the wrong time, but I realized quickly that it was perfect timing. The recession is what created an appetite for a more transparent, low-fee, customer-aligned model like Betterment.

    What was the most surprising thing about the process?

    As embarrassing as this is, when I first started the company I thought I was going to do everything myself. I was working on the concept while in business school and was getting feedback from my friends… but the only employee I put into my models was me. I was going to do all the coding and handle all the legal and build a fully automated solution. And that worked, so long as it was still a concept. But once I started to build the integrations and software, I realized I was going to need the help of others. I had to bring in co-founders and employees. The work just kept growing.

    The reality is that when you’re building a company, you’re going to need partners and really smart people to help turn your ideas into a big success.

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    What was the hardest part?

      The hardest part about the process of going from the initial idea of Betterment to the actual business was gaining credibility and recognition, especially as a financial services company. When starting Betterment, we were going up against the big guys like Fidelity and Schwab that had long established themselves in the industry. The barrier to entry was tough.

      Did any previous jobs inspire you to run Betterment the way you do?

        In college, I managed a small restaurant. In high school, I managed our student newspaper. I loved leading those small teams and working together with my friends. We had exceptional camaraderie. While many people wouldn’t expect those types of jobs to help me build a financial services company, I learned how I wanted to work with others and what I valued in a team. A strong team culture became a requirement for whatever idea I was going to pursue.

          When I was working as a consultant for banks, I was learning all this great stuff, but I found that most of our products that we were developing didn’t really take into account what the customers want. We would go on a six-month product development cycle and never talk to the customers. This was exactly the type of experience that I didn’t want to take with me. I created Betterment for this exact reason — I wanted to build products that put the customer first and align with the customers’ wants and values.

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          Who are the people you lean on most?

            I have been so fortunate to have been surrounded by an incredible support group throughout the process of launching Betterment — and still do today. My wife, Polina, my parents and my business school professors have been supporting the business since day one. And today, I have an incredible team of 240 employees who I’m thankful support the mission of empowering people to do what’s best with their money and continue to work on making Betterment the best offering out there for investors.

            What advice would you give to someone who wants to start their own business?

              The first lesson I learned as an entrepreneur was the importance of making your business idea “real.” What I mean by that is, whatever you’re building or doing, send the thinnest proof of concept out to the market that you can, so you can build it. Make it something tangible that investors, customers and potential employees can react to.

              When we were starting Betterment, we had to make the site really quickly, and I coded it up myself. I’m not an engineer, I’m not a coder, but I had to get in there and build something, a proof of concept that people could see. But even if it’s something simple like printing out your own business cards, make your company real, make it something tangible. With every little bit that you make it incrementally more real, people will start to believe in what you are doing.

              When did you realize Betterment was going to make it?

                It’s important to always strive for constant iteration and improvement. Entrepreneurs are often asked, “At which point can you breathe a sigh of relief knowing that you’re in a good position to be successful?” — and the answer should almost always be never. As your company continues to grow, it’s important to become even more focused than ever before. I don’t think there is ever a time to breathe a sigh of relief. It’s never a good idea to get comfortable with your position because that’s when you are most vulnerable to falling behind. We will always strive to grow faster and faster.

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                How do you define success?

                  I ask my team at Betterment to commit to doing the best work of our lives. I want us to build an institution that we can all look back on and say, “Wow, that is a great thing we built, and what a thrilling time it was.” One of our company values is: “Create enduring quality.” We’ll be successful if our customers appreciate the quality that we’re building, and if the customer-centricity that we seek in financial services is enduring and forces real change — not just for our own customers, but for the industry at large.

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