Taking Betterment to School

There’s been a brawl between Betterment and the entire online financial advisory population these past two weeks.  It all started when Betterment, an online-only service that manages money for individuals, decided to write a post saying that all financial advisors were worthless and conflicted.  The post was anonymously written (a bitch move if ever there was one) and it featured a giant picture of a man’s face on a pig’s body, essentially calling advisors pigs.  And putting the insults aside, it was also embarrassingly misinformed, citing a study of brokers and conflating them with fiduciary advisors.

And I called them out and they made a half-hearted, limp-wristed attempt at justifying their post, leaving it without a byline and with the pig-man image intact.  Then Brightscope and Michael Kitces and Scott Bell and others got involved in defending the profession.  And then Betterment’s post disappeared, then it came back and they blamed a technology glitch.

The whole recap of the brawl was published at RIABiz overnight here:

After outcry, Betterment 86’s (but not on purpose) a blog post inflaming advisors

Anyway, here’s my message to Betterment:

I’m too busy to continue this fight so this is the last thing I’m going to say on the subject.  Rather than tear you apart, I’d prefer to help you – because I think what you are trying to do will be helpful to a certain set of investors and is long-overdue.  I know you’re well-educated and sharp guys, but I’ve forgotten more about this business than you will ever know, so pay attention:

1.  We are not in competition.  You will thrive in the mass affluent space (100k-250k investable household assets) most likely where there are less complicated estate  and taxation issues and the market is not serving them anymore (wealth managers have migrated upstream to higher minimums out of necessity).  You can have that mass affluent market and I hope you take a ton of share.  If a prospective client tells me he is deciding between us and an online service, I will suggest to him that we are not a good fit and he should probably choose the website.  Got that?

2.  You can be aggressive without being an asshole.  I respect the aggressive push, believe me, I do.  But I had coffee with Bill Harris the other day and he was excited to walk me through his Personal Capital app (which will compete in your sandbox) on his iPad.  He and I are ostensibly competitors but again, in name only, not in real life.  But we can both improve our respective businesses by communicating and sharing, not by firing cannons at each other.  Bill’s pedigree is ridiculous (former CEO of Intuit) and he could very well come on strong and act like a dick, but he does not.  Because he’s a gentlemen and you’d be lucky to have a quarter of his chops and experience.

3.  Americans have $28.6 Trillion in investable assets and another $13 trillion in retirement assets.  And you want to get into a knife fight with someone like me?  Are you retarded?  Not enough room for all of us?  Let’s not act like we’re fighting over the last drumstick at a chicken dinner.  Focus on your channel and we’ll focus on ours.

4.  RIAs are not brokers, we are the DISRUPTORS of the brokerage houses.  Don’t ever get that twisted again. And we are not “threatened” by technology.  We have used technology of our own to great effect in leveling the competitive playing field against Old Wall Street.  We are voracious users of technology in every facet of our practices.

5.  I can see for miles and miles and miles and miles and miles…  I already know what’s going to happen to your company.  Your model is going to need to be tweaked as soon as it becomes apparent that people with real assets will never commit to a service managing it without the ability to talk to actual advisors in person or on the phone.  This is a fact.  There are no web doctors or lawyers serving high net worth people.  There never will be.  And so you’re going to have to start hiring the very advisors you detest and have heaped so much scorn upon.  This is going to get costly, we’re talking licensed and knowledgeable people, this is not a call center in India.  And then guess what?  Your new competitors will not be me and my fellow RIAs and wealth managers.  Your new competitors will be Merrill Edge and Vanguard and Charles Schwab and Fidelity.  And good luck with that.  They can build anything you think you can and the costs will be a rounding error to them.

And then you’re going to have to explain to the venture backers about why the costs and staffing are so out of whack with the original projections.  Then you’re going to have to pretend you didn’t say advisors were all useless, as you begin hiring them to man the phones and email contact forms.  And when that news comes out, everyone will know it.

But don’t worry, you can tell the VCs it’s a “pivot” – they love that stupid term.

Anyway, I wish you the best of luck and I harbor no ill feelings for the post – bygones.  If you ever decide to become a bit more civil, my door is always open for a chat.



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