Bogle Inspired Stein's Betterment, but They Had Disagreements

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Jack Bogle, the Vanguard founder whose company and low-cost index mutual funds altered the investment landscape, supported Betterment and its CEO and founder Jon Stein. But they had disagreements.

In a note on the website of the automated advice platform, or so-called "rob advisor," Stein said that Bogle, who died January 16 at the age of 89, had as much influence on his professional career as anyone. He recalled meeting the finance magnate while attending Columbia Business School in 2009—at a book signing, where Stein pitched him the idea for Betterment. They reconnected at a luncheon in New York City in 2013 and the following year, as attention to Betterment grew, Bogle reached out to Stein and wanted to meet.

It was the only in-person meeting between the two but a memorable one for Stein. They corresponded periodically via email.

“To me he was also this personal idol and became something of a mentor and a coach," Stein said. "He was someone that was really rooting for us and helping us in a small way.”

The two had their disagreements. Stein told WealthManagement.com he liked debating with Bogle, who challenged him on Betterment's allocation models putting client money into international equities. Bogle argued that funds tracking indices like the S&P 500 included global firms, and that already gave clients international exposure, Stein said.

They also went back and forth on the use of mutual funds over exchange traded funds, and over Vanguard itself in at least one case: Stein said he called Vanguard a "fund manufacturer" in an interview and likened the company to other asset managers. That offended Bogle, who immediately made sure he let Stein know how displeased he was with that characterization.  

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Bogle also told Stein he liked the challenge Betterment posed to the financial advice industry; Bogle was famously skeptical of the need for full-service human advisors among the mass affluent. He said the two talked about how Vanguard's Personal Advisor Services competed with advisors, and with Betterment, but said Bogle was more enthusiastic about the "crusade" they were on to help investors.

"If we’re both good, we’ll both win,” Bogle told Stein.

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