Ten Questions with Jonathan Stein, Founder & CEO at Betterment
As a young college grad entering the financial services industry, Jonathan Stein was told, “It doesn’t matter what customers think, so long as the numbers work.” A decade later he has turned the industry dogma on its head as Founder and CEO of Betterment, the smart investing service that epitomizes a customer-centric approach. Jon’s a true pioneer, creating the first robo-advisor startup, and ushering in an era where fintech is bringing financial advice with a human approach to the masses. Last year Betterment charted new territory yet again, becoming the first independent robo-advisor to reach $10 billion in assets under management.
Tell us the origin story of you becoming a founder.
It goes back to undergrad, where I studied behavioral economics. I was really interested in economics — which is all about how the world can be a better place if we make rational, efficient decisions — and behavioral biology, which says humans often make (and try to justify) irrational decisions. Finding the overlap between those two areas was a passion of mine. I wanted to help people make better decisions, because in doing so I believed we could make people happier and make world a better place. Unfortunately there wasn’t an obvious career path for that. [laughs] So after college I found myself on Wall Street in New York, consulting on product development and risk management for some of the biggest banks and brokers in the country.
It was a learning experience for me, getting to see how the big institutions work. And what I learned was that they most often weren’t thinking about their customers. We’d go through a six month project on a product development and talk about default rates and all the various pricing curves, but never talk to a customer…never consider what a customer might want from the institution. I decided I wanted build a different kind of financial company: one that would be customer-centric, use innovation and technology to bring efficiency and better choices to everybody; a company that would reinvent financial services around the customer. The obvious entry point was around investing. It seemed clear people were being tremendously underserved by the incumbent institutions, and I saw an opportunity to improve that.
What was your lowest/hardest time as a founder and how did you get through it?
One of the toughest days I can remember is when we were first getting teams together. There were four of us at the time and my co-founder (Betterment’s original CTO Sean Owen) was working from London while going to business school. The working relationship had become strained between the three of us based in New York and Sean, and he decided to move on. I remember taking a few long laps around Union Square with my other co-founder Eli, talking about whether or not we’d be able to go on and what we were going to do to recover. I wasn’t sure we’d be able to replace him or keep going as a company. It was a dark time, and it took a lot of faith to get through it.
What advice would you give your younger self, the self who first started the business?
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 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 manage customers’ money and 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.
In one sense, whenever you hire someone you’ve failed a little, because you haven’t been able to automate or remove that task. But in another sense, the reality is that you’re going to need partners and really smart people to help turn any idea into a big success.
What is one quality you look for in team members?
There are actually three things: horsepower, passion and openness. Horsepower, to me, means people with high output and intellectual curiosity. They have the drive and flexibility to wear many different hats as things change, rather than having a single expertise.
Passion: people who care deeply, who are enthusiastic. Most of our employees were Betterment customers before they came on, and that’s a great passion to have if you really care about the product and want to make it better. Passion can also be other things — some people weren’t Betterment customers before they came here, but they were passionate about user-centric design or Ruby on Rails. That passion carries through to your coworkers.
Third, I look for openness. I always get people to ask questions in any interview that I do. I want to see that they have an open mindset; they believe they only ever have partial information, and that by listening to others and expanding the amount of info they have, they can make better decisions.
What’s the most important part of your daily routine?
My mornings with my daughters, who are one and three years old, before I go for work.
What are your pet peeves?
Anyone who works with me will tell you the thing I most commonly complain about is inefficiency. I worked at a hospital during a post-bac pre-med year after college. I liked the idea of helping patients but was so frustrated with the inefficiency I saw in the hospital…so much paperwork, people waiting hours to be treated. I found myself wanting to run the hospital instead of helping individual patients, because I wanted to fix all that inefficiency.
In finance there are so many inefficiencies. That’s part of what I wanted to fix with Betterment. Cut out all the unnecessary stuff, reduce the cost, just give the essentials. By using technology to make us more efficient we’ve made great financial advice accessible to anyone, for the first time.
Favorite work tool.
Inbox Pause. I only get my emails delivered once a day at 6am every morning. That way I can go through all of yesterday’s emails and be prepared for the day ahead, and stay focused on the task at hand. I’m not constantly being interrupted and context switching.
Favorite personal tool.
Well, Betterment obviously. [laughs] I love seeing everything all in one place and knowing my money is being managed well. But if I had to choose another that’s not my own company — I really enjoy using Swarm and Foursquare. I love to see where I’ve been and keep a running list of places I want to check out.
Where do you find inspiration?
This article from Betterment’s resource center. While the numbers are clearly outdated considering we now have more than 300,000 customers, it’s still such a powerful reminder of the incredible work the team is doing. We’re changing the future of wealth management and helping real people make the most of their money. Our growth has been tremendous and it’s something that motivates myself and the team to keep doing what we’re doing.
What do you hope to do in 2018 that you have never done before?
I’m trying CrossFit this winter. I bike into the office in the summer, spring and fall but in the winter I have to do something to keep the pounds off. I’m also really excited to take my three-and-a-half-year-old daughter skiing for the first time.
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