Betterment 'seeing a ton of inbound calls' after Schwab deal: Jon Stein

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SAN FRANCISCO — Schwab’s planned $26 billion takeover of TD Ameritrade may be a boon for a surprising type of financial services firm — a challenger custodian that is also a robo advisor.

That’s according to Betterment CEO Jon Stein, who took aim at some of his favorite targets — including Charles Schwab, big banks and his independent robo nemesis Wealthfront’s Andy Rachleff — as a featured speaker at Financial Planning's In|Vest West conference.

In the wake of Schwab’s pending acquisition, Stein said his firm was presented with a major opportunity to recruit former TD Ameritrade advisors who aren’t happy switching to Schwab and are looking for other options.“As the leading challenger custodian, we’re seeing a ton of inbound calls as a result [of the deal],” Stein said.

While small advisory firms were Betterment’s primary target market, firms with significantly more assets were also approaching the robo advisor for custodial services, he said.

“The bigger firms want to talk,” Stein said. “We’re introducing models that we will be rolling out for them.”

Stein also took aim at banks, whose products, he claimed, “hurt America.”

The leading independent robo advisor, which manages $20 billion in client assets, is “shifting resources hard” to the sector, Stein said, adding that banking represents one of Betterment’s biggest opportunities.

Betterment recently introduced high-yield cash reserves, which attracted around $1 billion in deposits within a few weeks, according to Stein. The company also offers checking and savings products.

Nonetheless, the New York-based robo advisor’s banking efforts were still in the early days, he cautioned, adding that he couldn’t predict what that business would look like in five years.

And Stein couldn’t resist taking a shot at Rachleff, who raised eyebrows at an In|Vest West keynote session when he said his millennial customers came to Wealthfront so they wouldn’t have to talk to people.

The difference between Betterment and other robo advisors, Stein said, is that “we believe humans will always be part of financial services. Most of us still like talking to people. We’re not going to use technology to replace us.”

Betterment is also keeping a close eye on subscription pricing, Stein said. “The need to do [subscription pricing] to replicate services like Netflix is overrated,” he said. “That’s not why we should do it. But doing it to be aligned with customer is useful.”

Betterment, which was looking to go public “in the next few years,” will also continue building out its 401-k and B-to-B Betterment for Advisors businesses, Stein said.

“Our growth plan is to push as much value as we can into our products,” he said.

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Robo advisors Fintech Betterment Jon Stein Charles Schwab Clearinghouses/custodians Digital banking