Weekly Briefing No. 67 | Betterment's Got Big Plans

As we head into Valentine’s Day, we hope your week is filled with financial innovation sweets. Here are the ones we picked out of the box:

  • The FR’s exclusive conversation with Betterment’s Jon Stein
  • Union Square Ventures’ noteworthy new deal
  • A scary new bank virus, a great regtech visual, BofA’s automated branches
  • A blockchain milestone in Georgia (the country), a fintech IPO inspiration
  • Company of Note: T-REX
  • Spark: Workplace wisdom courtesy of cats


Betterment's Got Big Plans.

In recent years, few fintech stories have been bigger than the rise of the roboadvisors. Now, after a slow start out of the gate, traditional providers of investment advice are either home-growing automated solutions or partnering with existing robos. Vanguard, Schwab and Blackrock have taken the lead amongst the incumbents, but their slower-moving peers like Merrill Lynch have only just gotten the robo memo. So what’s standing in their way of domination? Our answer: the few independent start-ups that have built the scale, brand and technology necessary to go toe-to-toe with incumbents and yet still appeal to digitally-savvy investors. For us, the leader of this group is New York-based Betterment, which now manages an industry-leading $7.4 billion and is widely viewed as the benchmark player in the digital advice sector.

Apart from gathering assets at a fast clip, Betterment and its CEO Jon Stein have been making plenty of headlines in the last few months. A vocal supporter of the DOL fiduciary rule, Stein took out full-page ads in The Wall Street Journal and The New York Times to encourage then President-elect Trump not to undo it. Then last week, the company announced new offerings that establish different ways in which its customers can receive human advice alongside its digital platform. Recently, The FR’s Gregg Schoenberg sat down with Stein to learn more about the firm’s hybrid offering and to gain a better understanding of the company’s broader ambitions. “We want to build a massive business,” said Stein. As their conversation shows, Stein and his company have a plan of attack and the moxie needed to get there.

Power to the people (backed by VCs).

In the Trumpian era, many leading venture investors have become increasingly bold about expressing their views on political and broader societal issues at work in America. Mark Suster of Upfront Ventures and Sam Altman of Y Combinator are two leading lights who come to mind. On the East Coast, Fred Wilson of Union Square Ventures also fits the bill. But what’s especially notable about Wilson’s firm is that it is backing up its world view with dollars. Exhibit A is the fund’s new and unusual investment in Tucows, a Michigan-based publicly traded company that boasts a half-billion dollar market cap. The company is the world’s third largest ICANN-accredited registrar and is an ardent facilitator of “open Internet” and net neutrality solutions. So what gives? Here’s USV’s Fred Wilson’s social activist-tinged rationale for the deal: “The cable and telephone companies would like us to believe the open Internet is threatened by overreaching government regulation. In fact, it is threatened by crony capitalism… We are thrilled to be working with Tucows, because instead of lobbying Washington to prevent competition, they are actively investing in fiber networks.” Ah, the venture times, they are a-changin.’


A new bank virus + Kaspersky Labs + treason = reality, a great spy novel. 

According to the attached article, 140 banks have been infected with a new form of malware that can sit quietly in the memory of compromised computers for up to six months undetected. The announcement of the so-called “Duqu 2.0” virus — a derivative of the famous Stuxnet virus — comes from Kaspersky Lab, one of the world’s largest internet security firms. Kaspersky is surrounded by a swirl of intrigue as well because Ruslan Stoyanov, the respected head of its investigations unit, was arrested a few weeks ago by Russian officials on treason charges. Is the new virus somehow related to this arrest? Tough to say, but it sounds like the basis of a great book by John le Carré.

A great regtech ‘vomit’ map. 

It’s easy to roll one’s eyes when looking at another scatterplot map of start-ups bracketed in a way that suits the bracketer. That said, we still believe in the importance of the confederacy of start-ups lumped together as regtech, which are disrupting everything from AML/KYC to fraud detection. In our view, the group is entering a golden era of increasing adoption, so this chart comes in handy.

Are real estate pros worried about shrinking bank footprints? 

Whether you believe that branches will become extinct one day (not us) or that we’ll just need fewer of them (us), there’s no denying that commercial real estate professionals will have their work cut out for them to find new tenants that are as equally large and stable as banks. We don’t hear too much about those planning efforts, but we suspect that property professionals understand that there’s a limit to the number of big box pharmacies cities can support. Maybe they’re hoping firms like Bank of America will field many more “automated branches,” which are smaller in size, but still require a decent amount of space to support their activities.

A blockchain milestone in an unlikely place. 

Wedged between the majestic Caucasus Mountains and the Black Sea lies the Republic of Georgia. The small and mystical country, which is home to an ancient winemaking industry and the charming city of Tbilisi, has been overrun by invaders so many times that historians have lost count. That’s why it’s fitting for Georgia to be the world’s first nation to initiate a full-blown project to secure land titles on the Bitcoin blockchain. The project, co-managed by Georgia’s National Public Registry and Bitfury Group (which is backed by The Georgian Co-Investment Fund), will facilitate putting real estate transactions on a private blockchain, where they are turned into a cryptographic hash. In turn, that hash is made public on the Bitcoin blockchain to verify authenticity.

An IPO inspiration for fintech CEOs. 

No, it’s not Snap. In fact, the IPO in question isn’t related much to fintech. It’s the anticipated floatation of Saudi Aramco, which is expected to be the biggest initial offering in history. The role of solo IPO advisor could easily have gone to one of the global banks or to venerable boutiques such as 179-year old Rothschild & Co. or 169-year old Lazard. Instead, this plum assignment was handed to 10-year old Moelis & Company. How did it pull off such a riyal-rich feat? Look to Ken Moelis, a well respected banker, who proves that a relatively small band of dedicated employees, when working in the zone, can beat any institution on Earth.



In our context, T-REX refers neither to an ancient carnivorous dinosaur or an ancient British glam rock band. Instead, it’s the provider of an enterprise SaaS platform that helps renewable energy issuers, investors and bankers better quantify the unique characteristics associated with solar, building upgrades and other esoteric transactions. That’s important to creating more transparency and standardization around renewable energy project finance offerings, which in turn, can lower costs and promote more transaction flow.


Comings and Goings:

The road to redemption for HR benefits platform Zenefits notched another milestone this week with the announcement that former Ooyala Chief Jay Fulcher would take over as the company’s CEO and former PeopleFluent CEO Jeff Carr would serve as CRO. The company’s turnaround has been a painful process (it laid off hundreds of employees this week as well), but recruiting these two seasoned executives is likely to increase confidence that the worst is over.


We’ve never dug cats. However, as we learned from the attached article, these furry creatures live in the present, know how to find contentment within themselves and generally avoid the emotional entanglements with people that plague their cross-town rivals, dogs. Do we think that you should act like a cat in the workplace? Not really, but we do think a dose of feline could do many of us (and our careers) some good: “House cats would not exist without humans, but we didn’t really create them, nor do we control them now. Our relationship is less about ownership than aiding and abetting.”

Quote of the Week:

"Never ruin an apology with an excuse."

~ Benjamin Franklin, Founding Father and true financial revolutionist