(Bloomberg Opinion) -- How can technology solve some common investing issues? That was the question Jonathan Stein, this week's guest on Masters in Business, had been mulling when he went off to school.
Today, the company he co-founded and heads, Betterment LLC, is one of the best-known so-called robo-advisers -- a computer-driven investing service -- with more than $16.4 billion under management.
His academic work, both at Harvard and Columbia Business School, focused on the distinctions between academic theories of economics and how investors behave in the real world. He recognized that this created opportunities that were being overlooked by Wall Street -- particularly the ability of software to measure risk tolerances and figure out an appropriate asset allocation. In his class in entrepreneurial finance, Stein used the idea of an online automated investment adviser as his case study. The feedback allowed him to enhance many of the financial services now offered by Betterment.
In our conversation, he explains how the industry has changed since he started the company, notably the acquisition costs of finding new customers. We also discuss some of Betterment’s online competitors. As Stein sees it, online investment advice is at the core of Betterment's DNA, while robo-advisers are merely an add-on service at most of his rivals.
His favorite books are here; a transcript of our conversation is here.You can stream/download the full conversation, including the podcast extras on Apple iTunes, Bloomberg, Overcast and Stitcher. All of our earlier podcasts on your favorite host sites can be found here.
Next week we speak with Christopher J. Brightman, chief investment officer of Research Affiliates LLC.
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Barry Ritholtz is a Bloomberg Opinion columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He is the author of “Bailout Nation.”
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