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Betterment Yearns to be Amazon of FAs. Does Amazon?

July 10, 2017

The CEO of robo-advice pioneer Betterment believes his firm can turn into the Amazon of financial services, he tells Business Insider. But if Amazon itself entered the game, it could drastically alter the wealth management industry forever, financial planners tell InvestmentNews.

Asked by Business Insider whether he thinks Betterment can face the competition from incumbents jumping into the robo-advice arena, Jon Stein, the company’s CEO, tells the web publication that Betterment, like Amazon, has a focus that legacy firms lack.

Traditional firms such as Morgan Stanley, Charles Schwab and Vanguard, according to Stein, are trying to work two incompatible models simultaneously.

Morgan Stanley, for example, tries to incorporate a customer alignment track with its traditional brokerage alignment model, Stein tells Business Insider (Morgan Stanley declined comment to the web publication on Stein’s remarks). But according to Stein it is customer alignment that’s the future of the industry, thanks to the partial implementation of the Department of Labor’s fiduciary rule, which purports to require retirement advisors to put clients’ interests first and went into effect a month ago.

Like Amazon, Stein tells Business Insider Betterment doesn’t “have conflicts with a set of existing infrastructure and systems and people who were built around doing things the old way.”

But Amazon itself could get into wealth management, considering that it’s already doing $1 billion in small business lending and brisk business in payments and credit cards, InvestmentNews writes.

And Amazon’s brand recognition and “ultimate distribution system” means it would be easy for the online retail giant to launch anything they like, Julia Carlson, chief executive of Financial Freedom Wealth Management Group, tells the publication.

Amazon entering wealth management would cause a major disruption to the advice industry, pushing down prices and driving up demand for far faster delivery of financial services, advisors tell InvestmentNews. In particular, Amazon could be a serious threat if it partners with one of the established firms with good reputations — such as Fidelity Investments or Vanguard, advisors tell the publication. Those are the same legacy firms that Betterment’s Stein considers too conflicted by their old ways … Now, what if Amazon partnered with Betterment?

By Alex Padalka
  • To read the Business Insider article cited in this story, click here.
  • To read the InvestmentNews article cited in this story, click here.