StarZero All shows Try the podcast clipper →

May 25, 2017 · 25m · top-founders

670: Betterment Vs. Vanguard, Betterment Passes 200,000 Investors, $8B in AUM with CEO Jon Stein

John Stein · 12m spoken Nathan Latka · 9m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

In this episode of The Top, host Nathan Latka interviews Betterment founder and CEO Jon Stein to explore how the automated investment platform scaled to $8.2 billion in assets under management across 240,000 funded accounts. Stein details the company's fiduciary business model, competitive advantages over traditional index funds, bootstrapping roots, and long-term vision of becoming a public, enduring financial institution.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 44.3% of the talking time here. How this is scored →

Nathan as informed peer 3.7 Guest teaching 2.2 Guest disagreement 1.5 Nathan pushing back 2.7
05100:0010:0020:001:57–8:30 · Nathan as informed peer 4/10 Betterment's Automated Wealth Management and Fiduciary Model Latka guides Stein through his founding story and career timeline, clarifying details like Vanguard's low expense ratios and fiduciary standards. Stein explains why traditional financial institutions were broken and how Betterment automated money management.8:30–11:40 · Nathan as informed peer 4/10 Initial Bootstrapping, Venture Funding, and Organizational Growth Latka drills into early financing mechanics, founder debt, and venture scale. Stein details pooling under 400k in seed funding and scaling to over 200 million raised across 220 employees.11:40–16:54 · Nathan as informed peer 7/10 Organic Word-of-Mouth Engine and Multi-Channel Acquisition Latka presses Stein hard on paid marketing spend and challenges Betterment's value proposition against Warren Buffett's Vanguard index advice. Stein deflects paid spend and bluntly claims Vanguard investors are burning money, directing the host to read white papers on their site when pressed on specifics.16:54–20:00 · Nathan as informed peer 5/10 Scaling Towards an IPO and Transparent Revenue Economics Latka probes Betterment's customer scale, account minimums, and whether they are raising or selling out. Stein clarifies their sole 0.25% revenue model and their definitive commitment to taking the company public.20:01–22:36 · Nathan as informed peer 2/10 Sponsor Message: Klipfolio 90-Day Extended Free Trial Segment includes Latka's Klipfolio sponsor message and the standard Famous Five rapid-fire questions covering favorite business books and sleep habits.22:36–23:47 · Nathan as informed peer 0/10 Interview Recap and Past Episode Recommendation Solo host outro summarizing episode metrics, reviewing key tax features, and recommending upcoming episodes alongside a sponsor callout.1:57–8:30 · Guest teaching 3/10 Betterment's Automated Wealth Management and Fiduciary Model Latka guides Stein through his founding story and career timeline, clarifying details like Vanguard's low expense ratios and fiduciary standards. Stein explains why traditional financial institutions were broken and how Betterment automated money management.8:30–11:40 · Guest teaching 2/10 Initial Bootstrapping, Venture Funding, and Organizational Growth Latka drills into early financing mechanics, founder debt, and venture scale. Stein details pooling under 400k in seed funding and scaling to over 200 million raised across 220 employees.11:40–16:54 · Guest teaching 4/10 Organic Word-of-Mouth Engine and Multi-Channel Acquisition Latka presses Stein hard on paid marketing spend and challenges Betterment's value proposition against Warren Buffett's Vanguard index advice. Stein deflects paid spend and bluntly claims Vanguard investors are burning money, directing the host to read white papers on their site when pressed on specifics.16:54–20:00 · Guest teaching 3/10 Scaling Towards an IPO and Transparent Revenue Economics Latka probes Betterment's customer scale, account minimums, and whether they are raising or selling out. Stein clarifies their sole 0.25% revenue model and their definitive commitment to taking the company public.20:01–22:36 · Guest teaching 1/10 Sponsor Message: Klipfolio 90-Day Extended Free Trial Segment includes Latka's Klipfolio sponsor message and the standard Famous Five rapid-fire questions covering favorite business books and sleep habits.22:36–23:47 · Guest teaching 0/10 Interview Recap and Past Episode Recommendation Solo host outro summarizing episode metrics, reviewing key tax features, and recommending upcoming episodes alongside a sponsor callout.1:57–8:30 · Guest disagreement 1/10 Betterment's Automated Wealth Management and Fiduciary Model Latka guides Stein through his founding story and career timeline, clarifying details like Vanguard's low expense ratios and fiduciary standards. Stein explains why traditional financial institutions were broken and how Betterment automated money management.8:30–11:40 · Guest disagreement 1/10 Initial Bootstrapping, Venture Funding, and Organizational Growth Latka drills into early financing mechanics, founder debt, and venture scale. Stein details pooling under 400k in seed funding and scaling to over 200 million raised across 220 employees.11:40–16:54 · Guest disagreement 5/10 Organic Word-of-Mouth Engine and Multi-Channel Acquisition Latka presses Stein hard on paid marketing spend and challenges Betterment's value proposition against Warren Buffett's Vanguard index advice. Stein deflects paid spend and bluntly claims Vanguard investors are burning money, directing the host to read white papers on their site when pressed on specifics.16:54–20:00 · Guest disagreement 2/10 Scaling Towards an IPO and Transparent Revenue Economics Latka probes Betterment's customer scale, account minimums, and whether they are raising or selling out. Stein clarifies their sole 0.25% revenue model and their definitive commitment to taking the company public.20:01–22:36 · Guest disagreement 0/10 Sponsor Message: Klipfolio 90-Day Extended Free Trial Segment includes Latka's Klipfolio sponsor message and the standard Famous Five rapid-fire questions covering favorite business books and sleep habits.22:36–23:47 · Guest disagreement 0/10 Interview Recap and Past Episode Recommendation Solo host outro summarizing episode metrics, reviewing key tax features, and recommending upcoming episodes alongside a sponsor callout.1:57–8:30 · Nathan pushing back 2/10 Betterment's Automated Wealth Management and Fiduciary Model Latka guides Stein through his founding story and career timeline, clarifying details like Vanguard's low expense ratios and fiduciary standards. Stein explains why traditional financial institutions were broken and how Betterment automated money management.8:30–11:40 · Nathan pushing back 2/10 Initial Bootstrapping, Venture Funding, and Organizational Growth Latka drills into early financing mechanics, founder debt, and venture scale. Stein details pooling under 400k in seed funding and scaling to over 200 million raised across 220 employees.11:40–16:54 · Nathan pushing back 7/10 Organic Word-of-Mouth Engine and Multi-Channel Acquisition Latka presses Stein hard on paid marketing spend and challenges Betterment's value proposition against Warren Buffett's Vanguard index advice. Stein deflects paid spend and bluntly claims Vanguard investors are burning money, directing the host to read white papers on their site when pressed on specifics.16:54–20:00 · Nathan pushing back 4/10 Scaling Towards an IPO and Transparent Revenue Economics Latka probes Betterment's customer scale, account minimums, and whether they are raising or selling out. Stein clarifies their sole 0.25% revenue model and their definitive commitment to taking the company public.20:01–22:36 · Nathan pushing back 1/10 Sponsor Message: Klipfolio 90-Day Extended Free Trial Segment includes Latka's Klipfolio sponsor message and the standard Famous Five rapid-fire questions covering favorite business books and sleep habits.22:36–23:47 · Nathan pushing back 0/10 Interview Recap and Past Episode Recommendation Solo host outro summarizing episode metrics, reviewing key tax features, and recommending upcoming episodes alongside a sponsor callout.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 65.4% · guest 34.6%0:00 · Nathan 65.4% · guest 34.6%3:00 · Nathan 17.8% · guest 82.2%3:00 · Nathan 17.8% · guest 82.2%6:00 · Nathan 16.8% · guest 83.2%6:00 · Nathan 16.8% · guest 83.2%9:00 · Nathan 40.2% · guest 59.8%9:00 · Nathan 40.2% · guest 59.8%12:00 · Nathan 31% · guest 69%12:00 · Nathan 31% · guest 69%15:00 · Nathan 34.1% · guest 65.9%15:00 · Nathan 34.1% · guest 65.9%18:00 · Nathan 69.2% · guest 30.8%18:00 · Nathan 69.2% · guest 30.8%21:00 · Nathan 66.9% · guest 33.1%21:00 · Nathan 66.9% · guest 33.1%24:00 · Nathan 100% · guest 0%24:00 · Nathan 100% · guest 0%
Sharpest disagreement ▶ 15:22 Stein deflects question to website white papers

When Latka repeatedly pushes Stein to define vague terms like behavioral optimization and dividend shielding, Stein dismissively tells Latka to go read dozens of white papers on their website.

 Hardest push from Nathan ▶ 14:57 Latka refutes Stein's claim about outdated advice

Latka interrupts Stein to point out that Warren Buffett reiterated his passive index advice in a recent January interview, refusing to let Stein dismiss the comparison as obsolete.

 Biggest teaching moment ▶ 15:56 Stein explains advisor versus mutual fund company

Stein educates Latka on the fundamental structural difference between Vanguard selling proprietary funds and Betterment acting as an independent fiduciary that optimizes across funds.

 Nathan holds their own ▶ 15:37 Latka cites specific tax optimization pillars

Rather than accepting Stein's vague marketing pitch, Latka demonstrates direct knowledge of Betterment's platform features, specifically naming tax-loss harvesting, tax-coordinated portfolios, and tax-min lot selling.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Betterment's Automated Wealth Management and Fiduciary Model 4312 Latka guides Stein through his founding story and career timeline, clarifying details like Vanguard's low expense ratios and fiduciary standards. Stein explains why traditional financial institutions were broken and how Betterment automated money management.
Initial Bootstrapping, Venture Funding, and Organizational Growth 4212 Latka drills into early financing mechanics, founder debt, and venture scale. Stein details pooling under 400k in seed funding and scaling to over 200 million raised across 220 employees.
Organic Word-of-Mouth Engine and Multi-Channel Acquisition 7457 Latka presses Stein hard on paid marketing spend and challenges Betterment's value proposition against Warren Buffett's Vanguard index advice. Stein deflects paid spend and bluntly claims Vanguard investors are burning money, directing the host to read white papers on their site when pressed on specifics.
Scaling Towards an IPO and Transparent Revenue Economics 5324 Latka probes Betterment's customer scale, account minimums, and whether they are raising or selling out. Stein clarifies their sole 0.25% revenue model and their definitive commitment to taking the company public.
Sponsor Message: Klipfolio 90-Day Extended Free Trial 2101 Segment includes Latka's Klipfolio sponsor message and the standard Famous Five rapid-fire questions covering favorite business books and sleep habits.
Interview Recap and Past Episode Recommendation 0000 Solo host outro summarizing episode metrics, reviewing key tax features, and recommending upcoming episodes alongside a sponsor callout.

Statements from this episode (16)

Assertion Supported
Stein: Betterment is the largest independent online investment advisor
“Betterment is the largest independent investment advisor online.”
John Stein May 25, 2017 ▶ 2:05
Assertion Partly supported
Stein: Betterment charges 0.25% AUM fee, lowest in industry
“It's .25%, which is the lowest in the industry, and by charging this one clear transparent fee we align ourselves with the customer.”
John Stein May 25, 2017 ▶ 2:51
Assertion Supported
Stein: Betterment manages $8.2 billion in AUM
“Today we manage 8.2 billion dollars.”
John Stein May 25, 2017 ▶ 3:30
Assertion Contradicted
Stein: 80% of his Harvard graduating class entered finance
“80% of the graduating class from Harvard went into finance of some sort.”
John Stein May 25, 2017 ▶ 3:57
Assertion Supported
Stein: Financial services captured 40% of US corporate profits in early 2000s
“At that time, 40% of all the financial profits in the U.S. Were coming from financial services.”
John Stein May 25, 2017 ▶ 4:11
Assertion Not checkable as stated
Stein: Betterment's initial funding was under $400,000 from founders, friends, and family
“It was less than 400,000 dollars that we pulled together from ourselves and friends and families.”
John Stein May 25, 2017 ▶ 9:41
Assertion Supported
Stein: Betterment has raised $205M to date
“Two hundred and five million today.”
John Stein May 25, 2017 ▶ 10:13
Assertion Not checkable as stated
Stein: Betterment has reached 220 employees
“Today we have 220 people.”
John Stein May 25, 2017 ▶ 11:17
Assertion Not checkable as stated
Stein: Over 50% of Betterment customers join via word-of-mouth
“More than 50% of our customers, when they, when we ask, how did you hear about us? They say it was a friend.”
John Stein May 25, 2017 ▶ 12:21
Assertion Supported
Stein: Warren Buffett does not practice his own passive investing advice
“He's, he doesn't do what he preaches, right? He's an active investor himself.”
John Stein May 25, 2017 ▶ 14:36
Opinion
Stein: Betterment's 0.25% fee is more than offset by tax optimization
“I would compare an all in net return number, and I would think about that .2 to five percent being more than made up for in the tax optimizations alone, plus the behavioral optimization, the diversification, and the ease of use that we give you are worth a lot…”
John Stein May 25, 2017 ▶ 16:35
Assertion Not checkable as stated
Stein: Betterment is outgrowing historical adoption of ETFs and discount brokerages
“If you look at the growth of ETFs, we're growing faster than ETFs took off. If you look at the growth of say discount brokerages, we're growing faster than that.”
John Stein May 25, 2017 ▶ 17:31
Assertion Supported
Stein: Betterment has 240,000 funded customer accounts
“240,000 customers.”
John Stein May 25, 2017 ▶ 18:21
Assertion Supported
Stein: Betterment has more customers than Wealthfront
“It's more.”
John Stein May 25, 2017 ▶ 18:29
Prediction Open · timeframe May 2020
Stein: Betterment plans to IPO rather than sell to an acquirer
“We've always said we're going to make it a public company. We've always had our sights set on the long term. We're building an institution for the next century. We're not interested in selling out right now.”
John Stein May 25, 2017 ▶ 19:17
Assertion Contradicted
Stein: The 0.25% advisory fee is Betterment's sole revenue source
“That's it. That's our only source of revenue. That's all we do.”
John Stein May 25, 2017 ▶ 19:37
Made with StarZero

Turn any episode into a week of clips.

This entire site, over 2,600 episodes transcribed, diarized, checked and made playable, runs on the StarZero media pipeline. Drop in your own episode and the podcast clipper finds the moments worth sharing, cuts them, captions them, and reframes them for every feed.

Try the podcast clipper Learn more