The 220 people who work for robo adviser Betterment LLC gather in the New York company’s cafeteria twice a year to hear from their chief executive.
There, Jon Stein, a 38-year-old former bank consultant, often has addressed one of their biggest beefs with him: Even after years of trying to rein in his own worst habits, Mr. Stein remained a micromanager.
Mr. Stein sometimes was “sticking his nose in when he wasn’t being productive,” said Eli Broverman, who co-founded Betterment with Mr. Stein in 2008.
“Maybe it’s particularly tough for me because I built this company,” Mr. Stein said. “The first lines of code were mine. I’m intimately familiar with all the workings of it.”
Mr. Stein wants to do to financial services using technology and automation what companies such as Amazon.com Inc. have done to brick-and-mortar retailers. His mission is to make investment advice and financial services broadly accessible, while also lowering the cost and removing the compensation conflicts investors sometimes grapple with when working with a financial adviser.
Mr. Stein’s do-it-all mind-set has been a key factor behind Betterment’s success in delivering financial advice to investors. He has shaped a wealth-management business that one day looks to go public and become a household name.
Betterment relies on algorithms that gauge an investor’s risks and goals to recommend cheap, long-term investments. Through its app and website, the firm suggests a basket of exchange-traded funds for investors, rebalances portfolios and offers securities sale strategies to minimize tax bills.
But Betterment clients pay less than half of the typical financial adviser fee of as much as 1% of portfolio assets. Mr. Stein said the firm isn’t encumbered with hundreds of branches and hefty salaries for thousands of brokers.
The firm’s success—it has more than 250,000 clients—has spawned a raft of rivals, ranging from upstarts such as Wealthfront Inc. to Wall Street giants. Industry veterans say the onslaught of competition will make the firm’s next chapter that much more challenging.
“It’ll be about having a clear vision of the best way to serve customers,” Mr. Broverman said.
Along the way, Mr. Stein has had to grow into his CEO role and learn how to trust his employees, according to himself, colleagues and mentors, some of whom are investors in his company.
“There’s an easygoing exterior,” said Jim McCormick, chairman of First Manhattan Consulting, where Mr. Stein worked following graduation from Harvard University in 2001 with a degree in economics. That shell “hides a very demanding internal drive.”
In 2007, when Mr. Stein started work on his M.B.A. at Columbia University, he also took up coding in his spare time to build an early version of Betterment. “I really thought I could build it all myself,” he said, “but I quickly realized that was stupid.”
Mr. Stein eventually turned to his roommate at the time, an engineer at Google, to help build Betterment, as well as other friends, including Mr. Broverman, a securities attorney, to assist with the regulatory and operational work of launching a new wealth-management firm. Messrs. Stein and Broverman met when they played their first poker game together in 2003.
Mr. Broverman continues to serve on the robo adviser’s board after stepping down from his president role in April to focus on working with newer startups.
“My partnership with Jon is easily the best working relationship I’ve ever had,” he said.
In the years after Betterment’s launch, brokerage executives said the emergence of robo advisers wasn’t a threat. They said their firms tended to focus on wealthier investors whose more sophisticated needs usually necessitated having a broker.
That mind-set has changed over the past year or so as traditional brokerages such as Bank of America ’s Merrill Lynch and Morgan Stanley , as well as others like Vanguard Group and Charles Schwab Corp. , have worked on launching their own robo advisory services to attract younger and less-wealthy clients who have the potential to become bigger clients later.
Betterment’s $800 million valuation, provided by investors such as Bessemer Venture Partners and Swedish fund Kinnevik AB, has risen as robo advisers have collected more assets. Researcher Cerulli Associates estimates the robo advice industry had more than $80 billion in assets by the end of 2016, and will have $385 billion in the next five years, eating into the multitrillion-dollar asset base of traditional brokerage firms.
While Mr. Stein says he has gotten better at delegating tasks to the various teams that report to him, he still keeps a hand in activities such as answering customer-service calls several times a year—something all employees of Betterment have to do, too.
“It’s one way of creating a connection with the people we serve,” he said.
Write to Michael Wursthorn at [email protected]