It could've been an interesting showdown. Both Betterment CEO Jon Stein and Wealthfront CEO Adam Nash were panelists at a conference on fintech disruption on Tuesday in New York hosted by The Economist.

But the British editors kept them on separate panels, and Nash got to speak first.

While they didn't go head-to-head in front of the audience, Nash and Stein took their opportunities on stage to claim pole position by their respective firms in the digital wealth management race.

Nash described Wealthfront as the "leader" in the digital wealth management space; Stein claimed that "because of Betterment, fiduciary advice is available to everyone."

(The best line of the conference, though, belonged to Gad Goldstein, executive managing director of corporate investigations firm K2 Intelligence, when he noted that "the Valley will meet the Hill before it meets the Street.")

It wasn't all chest-thumping. The two discussed big ideas. Nash provided perspective on investor and fintech trends, while Stein analyzed the competing forces of regulation and innovation.


Nash described the services that Wealthfront provides its investors as being on the cusp of "the third wave of innovation to really help the individual investor."

The first wave of innovation happened with financial products, Nash said, culminating in the development of today's ETFs. The second wave was the development of the Internet, which unlocked financial information previously unavailable to the retail investor, and much of it for free.

This third wave of innovation, Nash said, which would dominate the market for the next two decades, is a wave of automation. "People trusting computers not just as tools, but actually as delegates. They will watch out for their own interests, and make decisions on behalf of them. And we see Wealthfront at the forefront of this trend of a whole new generation of investors."

The term automation, by the way, shouldn't conjure up the image of 20th century assembly lines, Nash said. "Automation has no obvious limit to the amount of personal data it can incorporate that are personalized for your situation."

Nash explained how "humans" (third-person reference emphasized) have not demonstrated an advantage in allocating assets on average over time, because, well, they are emotional creatures, guided sometimes by strong opinions rather than hard mathematics.

"The vast majority of professional managers underperform, and the retail investor is even worse off than the professional manager by hundreds of basis points," he said.

(The panel Nash was on, incidentally, was titled "Rise of the machines.")

Nash conceded that growth for any platform cannot be based on young investors alone. "If you have $2 trillion and you're looking for that third trillion, you're not going to get that from millennials in the next five to seven years, you have to go after the Baby Boomer market."

Wealth managers needed to be mindful that millennials trusted technology more implicitly than their parents, he added, and there was a trend of skepticism toward beating the market among young people. Big bank brands have few admirers among the demographic too, he noted.

"They'd rather see financial services built from companies like Apple, and Google, Facebook and LinkedIn," he said. "And not surprisingly at Wealthfront we've hired people from Apple and Google, Facebook and LinkedIn."

Nash said he is making a bet on this new generation of investor.

"We don't need to generate a trillion dollars in assets in the next few years. For us, billions of dollars is still big. I'm sure some day our eyes will get bigger."


By virtue of the panel he was on ("A better or riskier world") Betterment's Stein took a different tack on the market, exploring the clash that occurs between regulation and innovation.

"The market that we are in, financial services, exists because of regulation," Stein said. "There's a market because of laws that govern that market. Those laws make things more efficient."

But sometimes the law leads innovation, Stein said, and sometimes technology and industry leads where the law needs to go.

Stein sought to separate Betterment from other automated investment platforms.

"We're not the same as the others," he said. "As the first mover, and today the largest robo-advisor, we are fundamentally different from all the others. The reason we're the largest, the reason we're the fastest growing, is because we've built new rails for financial services."

This Vanderbilt-esque task has involved Betterment turning itself into a custodian and managing people's assets, Stein explained, laying down a new infrastructure to deliver cheap financial advice across the country.

"We started to be an advisor … to be a fiduciary, that was an important part of our model," he said. "Typically, 0.2% of the U.S. population has access to fiduciary advice. That's basically nobody. Maybe half of this room, but almost nobody outside of this room.

"Today, because of Betterment, fiduciary advice is accessible to everyone. That's a big change, that's a fundamental shift, and advice is at our core."

Stein added he literally did his homework on regulation before launching this endeavor.

"I bought a library," he said. "I bought 40 books on trusts and estates, derivatives regulation, investment law, and started to read and figure out what we would be. I didn't know whether we would be a mutual fund or a bank. Ideally, I did not want to be regulated. I just wanted to do right by our customer and build the services they wanted."

Cutting through the red tape and getting to the customer is the goal, Stein said. Technology will help manage "regulatory distractions," better, he added.

"We ultimately want to be the answer to the question, 'What should I do with my money?' for everyone. We want to manage all your money. And we can already do that better than most banks can, and we can do that better than investing firms can."

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