Fireside Chat: Interview with Mike Reust, President, Betterment

Why Digital-First Wealth Platforms and Banks See a Hybrid Model as a Wealth Generator for All

Transcription:

Holly Sraeel (00:10):

President of Live Media for American Banker. Sitting to my left is Mike Reust, he's President of Betterment. And we're here to talk about a digital first wealth, excuse me, how a hybrid model for between banks and wealth platforms like Betterment can better create wealth for customers. God did I botch that? Anyway, alright, we'll start over. So I want to throw some statistics out for Mike to address for the audience. And you're probably well aware of all these. Majority of US households don't have $600 in cash for an emergency. Most people's wealth is tied up in their home.

(00:58):

People start saving too late in life for retirement, and people often choose one route to create wealth versus the multiple avenues for wealth creation. So Mike's going to talk to us a little bit about this today and he's going to take us through why he thinks this hybrid model between banks and Betterment will create more wealth for all. So Mike, you've suggested that the best way for banks to fully engage in a strategy for wealth creation for customers is through a hybrid model that relies on digital first wealth platforms. Can you talk a little bit about this hybrid model and why it makes sense for banks and what it means for their customers?

Mike Reust (01:42):

Yeah, thank you. I think at a starting point for me, banks are like any other company, they only are great at some things, good at others and not stellar or even pretty weak. So as you think about these strengths and weaknesses, if you're a bank and you've got clients, there's lots of different shapes of banks, even local or regional banks, right? Maybe it's more of a small business centric relationship, maybe it's more of a retail centric relationship. Wherever your strengths lie, if you want to expand and do more for those clients that target customer, you will often need to partner with others to do it well. It's impossible to do it all. It's seemingly increasingly hard as time goes on to keep up in any given area, let alone all of them at once. And so I think it's very prudent to think who can you best partner with who is most strategically aligned with you to better serve your clients, to help them create wealth, to help them create jobs, like whatever their objectives are.

Holly Sraeel (02:37):

So when we had our call last week, you were talking about some easily addressable challenges that banks have. You talked about the need to close gaps that exist and the need to focus on features and functionality and creating a glide path for the lower end of the customer spectrum all the way through to higher end. You also talked about accessibility issues and not a strong existing path to wealth management or wealth creation for the masses. So can you elaborate on some of these challenges and how banks should address them?

Mike Reust (03:15):

Sure. So a lot of those issues were very client-centric. Maybe I'll start with a slightly less client-centric version, but a bank problem. The broker deposits market is a very good common example that helps banks deal with balance sheet issues. It's actually where I started my career. Weirdly enough, I was doing stress testing for banks in 2008, which was a pretty interesting time to do that. And I just graduated college, I was help building distributed systems. This was before AWS. And so I was basically hanging out with executives from rest in peace, Wachovia or some other banks that are still around Bank of America and trying to figure out as at that moment mortgage defaults were ticking up, what would that actually do to the impact of a bank? But anyways, the reason I'm telling you that story a little bit is these days it's not like a fully solved problem.

(04:05):

Banks still have to think about their balance sheets of course, but there's a lot of really interesting things available out there, right? The broker deposit and the suite markets have matured in a lot of ways and it is, you've seen it grow as a funding mechanism for banks and you've seen the partnerships with fintechs get a lot more nuanced. For example, we have at any given time, like 15 to 20 program banks, which we use to fund or to power our high yield savings accounts basically. And what's sort of interesting is a lot of the banks on that platform treat the deposits we're sourcing for them as core deposits, not even as brokered because the relationships are tight enough and direct enough that we can get away with that and that's good for them and that's good for the clients too because ultimately that's a lower cost of capital and they can manage things a little bit differently and that allows them to pay us a little bit better yield.

(04:55):

So they win, we win and we can pass on more of that to clients. Now, no one's going to build massive wealth off of high yield savings accounts rates, but it's certainly an important component for a lot of folks as they start their wealth building journey. And it's incentivizing, it's rewarding, it's sort of the emotional impact and the feeling like you're winning as a client is greater than the actual interest income from a 4% account right now we see that that's pretty cool to help people stay the course. I think that's a starting point for a relationship. But if we go back to the more the client-centric, like where banks I see in my offices each and every day struggle a little bit. It's keeping up with the digital wealth experiences, it's offering these products. For an average bank that has a bunch of retail consumers, they suddenly want to offer wealth management.

(05:44):

Well that's a pretty big order to fill, whether you want to go self-directed, manage robo style accounts, private banking, wealth management, suddenly you're probably going to have to start working with brand new regulators that actually feel and play a little differently than the ones you might be used to As a bank, you have to build and ship product that competes with other companies dedicated to that space. So it's very hard to get into it. That's why you saw 5, 6, 7 years ago when the Neobank thing took off in the us you had a lot of new digital first banks, you also had a lot of other banks starting to partner with, I'm here for Betterment, but Wellfront and many others out there to power their banking features and to offer those services as well, which in a way helps those banks drive more business in areas they couldn't compete with as directly, especially for younger tech enabled customers.

Holly Sraeel (06:34):

So when we were talking earlier, we talked about some of the challenges that non-banks and fintechs have in striking partnerships or establishing alliances with banks. One of the things that you raised is the conservatism of banks as regulated entities. Do you see that conservatism as somewhat of not a roadblock that's too strong of a word, perhaps something that makes them hesitant to venture further into wealth creation or wealth management?

Mike Reust (07:08):

Yeah, absolutely. I mean, look, I'm the late stage startup non-bank guy asking banks to be more risk seeking rather than risk averse. I totally get that. I that fully, I understand it, but at the same time, I grew up in an era in startups, in the wealth management space, investing space dealing with the SEC, dealing with the Department of Labor, dealing with finra. And there were pretty tough times where we didn't really have a choice but to be risk seeking because to differentiate and offer products that would grow and to do things our competitors weren't doing, we had to take those battles on. We were one of the first companies that taught FINRA what unit testing and functional testing was so that we didn't have giant quality assurance teams of people to validate every single change that was expensive and that would slow things down.

(07:57):

And those are tough, arduous conversations. And I'm not trying to suggest that banks have to take on the burden of redefining what it means to regulate them by their regulators, but I often feel, and I'm not going to share too many precise examples because I don't want to throw anyone under the bus, but there are definitely a lot of moments I run into, even with the banks seeking FinTech partnerships where suddenly it gets just a little hard and it often feels like rather than have a tough but very doable conversation with the regulator to do something that feels a little new, it's just like, no, no thank you. We're not going to pursue that approach. And I dunno, it's a little bit of a weird experience for me to be hanging out with a chief deposit officer and a CEO of a bank and a director of risk and the director of risk is trumping the CEO and the head of deposits. It's just that conservatism that comes through that honestly slows us down sometimes and thus makes it harder to offer differentiated competitive products that help them and help us and ultimately the clients.

Holly Sraeel (08:56):

So if we're agreed that banks could do and should do a better job in helping get people on a path to greater financial wellness and ultimately wealth creation. I guess the question that you've asked rhetorically is should banks partner with third parties that can power them or do they become a fifth third? You want to talk a little bit about that?

Mike Reust (09:20):

So an obvious concern you have to face a role play as the bank when you're thinking about what do we want to do? We want to go from offering retail transactional banking services to wealth management to retail consumers, or even I often see where we sell retirement plans or other employer benefits plans to our small, medium, large business clients. And it doesn't scale down very well. So we struggle to sell, I see this a lot with the regional banks where they power or help sell and operate and advise 401k plans and they can manage a plan that's like $50 million plus, which is a reasonably large plan, but they struggle to go down market. But in any case, they want to. It's a small business market, but the whole market is actually quite large. And my points is they often get hung up because they're very worried about partnering with a FinTech or someone else because the obvious concerns, normal counterparty risk, brand risk.

(10:22):

Do you still own the customer? How are those relationships going to feel? Who are these crazy leaders of these companies telling me I should take more compliance risk? I get it. It's tough, it's tricky, but I think there's a lot of really good examples out there of models where banks have chosen to embrace that and work pretty well. I've seen it directly at Betterment for example. We are going to, I'll just say a top 20 bank in the Carolinas that I'm not naming yet is going to launch a full SMB 401k experience with Betterment where betterment is the record keeper, it's the custodian, it's managing the investments, it's doing all the customer service, but the bank still owns the relationship, still owns the branding, and they've found some comfort in navigating that to expand where they can go to market without feeling like it's just some sort of distant referral relationship where they're effectively just giving us betterment, in this case, clients and participants.

(11:16):

And I feel like that's true in a lot of other cases as well. And I think you're going to see more and more of these partnerships come everyone knows. I think when I was born in the eighties, there was upwards of 14, 15,000 banks in the us. Now there's around 4,000, right? We've seen that slow steady decline. It's one of those things where we feel like everyone feels safe and comfortable and will always be here, but it's actually a struggle. You actually have to be scrappy. It's a fight for an organization to be relevant in the next five years, the next 10 years, again, 70% of banks disappeared over the past few decades.

Holly Sraeel (11:47):

It's a perfect lead in to what I'm about to ask you. So you feel that banks really need to establish a minimum viable product standard, which they're not good at. They don't come out of the startup world, they don't have that sort of frame of thinking. And you began by telling me that they have to have the conviction to only experience and decide really what they want it to be. And you gave me three bullet points, so I'm going to take you through them and I'd like you to respond to them. The first thing you said was, banks need to build something really good. So when they look at this opportunity, what should they be looking at?

Mike Reust (12:30):

And I'll stick to the example of this is the most common example I see of banks with large retail customer bases and they want to get into wealth management and they often want to get into wealth management for very obvious reasons. They want to deepen the relationships and they have a lot of graduation risk. If banks don't serve those clients well as they grow and their assets and wealth grows, then they're viable to get approached because that customer, whether through their company's 401k or whether it's through their own shopping around for a wealth manager is going to be sucked into that and the bank is going to eventually be disintermediated. And so that's where a lot of see a regionals and the larger locals come to us with concerns. So they want to get into the wealth management business, but the problem is their level of conviction for that strategic issue doesn't match the conviction they have to actually invest capital and to do it well enough that it's not a waste of time.

(13:25):

When you want to take a customer and start offering them investing services for the first time, you have an advantage of course in some sense because they're your customer, but you also have a challenge in that they may not see you as an investing expert as a company. And you have to overcome that by actually delighting them with a really good product that meets all their needs. You're not introducing some new wild concept that's never existed when a customer starts to get into investing, maybe not in the first day, but certainly soon they start to realize there's a bunch of things that are pretty normal that I should want. I need a brokerage account to buy and sell things that should probably have stocks, ETFs, and mutual funds and on and on and on. And if you as a bank want to launch an MVPA minimum viable product, which is well, we'll just launch a self-directed account that's six next to these transactional accounts and they can buy and sell.

(14:10):

What's easy stocks? We'll just do stocks at first. What I often see happen is you launch that product, it's far too limited and just the literal features it offers so you don't get much adoption. And this is also sort of like it comes with that you didn't commit to enough features, you also didn't commit to delightful enough experiences as a customer. You're like, okay, well great, I'm going to open this account and I'm going to transfer from my checking account into that self-directed account. Or what you would really expect is you open that account at a self-directed side and you would just want to use the checking account to buy stocks. What I have to transfer to this thing over here, that's a special different magic bucket of cash that suddenly I can use differently. Why are these things separate? It'll often be sort of a janky handoff experience where you're going from the bank's website to some other website to some other websites.

(14:57):

The mobile app will probably be separate and distinct. And as soon as you start adding those pieces of friction, it fails and you learn the wrong lesson. You learn that you bank a could not enter the wealth management space instead of we didn't do a good enough job and instead we're losing to our competitors in that use case. And that's a pretty tough thing because I get it, people want to have a small investment test and learn build from there, but it's tough. It's like as someone who's focused on the investing side for the past 15 years of my life, it is brutally tough and expensive and hard and you have to be dramatically better than the competitors that you are competing with. And again, as a bank, that's going to be the other investment firms. These folks, they have the internet regardless of their age and they know how to Google around and they're getting recommendations and they have friends and family who are telling them what to use. So that's what you're up against.

Holly Sraeel (15:51):

So in Betterment's work with various banks, particularly I guess at the regional level. Can you take us through some examples of cool things that you've done with some of them?

Mike Reust (16:06):

Sure. So I'll give you probably one of our deepest banking integrations that's been pretty cool for both companies. And then I'll give you another one I'm working on right now that I think will be really cool. So in 2020, in the height of the initial COVID March of 2020, we launched Betterment Checking. So literally DDA checking accounts that actually live at another bank. We partnered with National Bank of Kansas City and it was like a very clean, strategically aligned partnership. And the relevant point here is National Bank of Kansas City, what drives their businesses, mortgage originations and other things, not national transactional account management. So for us, betterment who wanted to offer first class banking services to our clients across the United States, there was no strategic conflict or conquesting issues with NBKC, with the National Bank of Kansas City. They were very interested in that.

(16:56):

And so for us, that was a perfect partner and we built this really great product and there are still moments due to regulations that it leaks through that it's in BKC, behind the scenes who's actually powering the accounts. It's very rare and very, very minimal at the most part. You can go to Betterment, download the apps, sign up, move your direct deposit, order paper checks, do all the things, not all, but 99% of the things you would normally expect to be able to do at a bank. And it works delightfully. So it's crossed that chasm where it doesn't feel like this separate, disjointed, janky thing. And I gave you that example about funding a self-directed account, which I still laugh about because there's two things. When I started Betterment again about a little over a decade ago that were differentiators then that's weird to me.

(17:40):

They're still differentiators. One of them is on the RA advisor business having true digital only, no Wet Inc involved account opening is still less common than I would expect. We're certainly not the only ones, but it's still actually common. And two is money movement is still terrible at most institutions, even within accounts within those institutions. And so for example, a betterment, when we do account investing, you want to fund it with your checking account, it's done, you're great. Wait, where would you like to fund it from? Literally any account you have at Betterment that it's legally okay for you to use to fund that other account, you can just do those transfers. It's dumb, it's simple, but it's perfect in that sense. And it's still the number one thing people are, it just works the way I expect it to. That's why I still use Betterment, that's why I still pay whatever fees you have and so on and so forth.

(18:29):

So back to the checking account, bringing those qualities to bear, we're able to launch and scale that successful product. And of course our best customers for us, the banking direct deposit relationship is the most important, durable, long-term thing you can actually develop with a customer. And so that's been a really cool thing for us to be able to develop in partnership with that bank. And I said I'd mentioned that a second one I'll mention because a little bit more off the wall, I was running into a lot of banks, I've mentioned NBKC does a lot of mortgage origination as their business. Obviously there's a lot of institutions, banks and otherwise that do that as well. And a big challenge they run into is that when they compete, and that might be some of you when you compete with larger banks, it's not exclusively larger banks, but it's often the larger banks Chase B of a Wells that they offer really generous relationship discounts.

(19:17):

Like Hey, if you've got a half a million with us or whatever, we will give you a quarter point, a half, a point a point off of your mortgage. And so when you talk to other banks and other mortgage originators, they don't actually have a great mechanism to replicate that because obviously that's a relationship driven discount where you're assuming the ARPU of those clients will pay for that discount. You're providing them on the mortgage. And we're doing some partnerships that are going to launch pretty soon where it's just across the brands where it's like, Hey, you're going to sign up a mortgage with this company over here. If you open and fund an account at Betterment with a certain amount of money, we're going to give you that same sort of discount. We're going to waive the closing costs. I'm sure a lot of you're aware of some of the legal challenges and regulatory challenges with that interaction, but these things are overcomeable when you have a little bit of creativity and a little bit of commitment.

Holly Sraeel (20:06):

Okay, so I want to talk a little bit about how whether you see banks, well, let me ask it this way. Should all banks pursue a wealth management business?

Mike Reust (20:24):

No.

Holly Sraeel (20:25):

Okay, tell me why.

Mike Reust (20:27):

I mean, a bank should pursue a wealth management business if it has an advantage to acquiring wealth management customers. If you just try to go out into the open market and acquire wealth management customers, you're going to have a bad time. It's going to cost you an incredible amount of money and you're not going to generate enough revenue to make it make worthwhile. The unit economics are not going to work for a very long time until you're very, very good at it. And so by it's sort of a unique advantage, not totally unique, a lot of banks have these advantages. Two obvious inroads come to mind. The one is you have a lot of transactional customers that need investing services. So if you have a lot of those customers, you can try to leverage that existing relationship and upsell them, cross-sell them, like pick your terms into your investment products.

(21:11):

You should probably talk to them first and make sure you're building the exact product that they need that they want that would compete with the fact that they're not doing anything. So it's coworker come that inertia and they'll start doing something or you would take their investing business away from another company that they're currently using. So that's one inroad. Another inroad that I see is very common for banks is I mentioned these sort of retirement plans or like s and b relationships where a lot of banks obviously do small business lending or various sized business lending. And some banks will take that a bit further and try to build longer term ongoing relationships by selling services, benefits, insurance, whatever. And it's often the case that those businesses, especially on the 401k side, because every employer including the owner of the company is a part of that business, you can then cross-sell those participants into an investing business that's like they need that typically in addition to the 401k, right? You can only do so much in the 401k. And that's a really big compliment and funnel that I see and it's a tough business and those that are the best at it probably cross sell upwards of 15 to 20% of 401k participants to investment. But it's a pretty potent funnel and those tend to be really good customers long term.

Holly Sraeel (22:21):

Excuse me, full disclosure, I have a head gold, sorry. So can you elaborate on what banks should be talking to customers about in terms of the totality of the financial wellness path? You rattled off a bunch of things to me that people just are not hitting on early enough in life. And I feel like this is an opportunity for banks to get them on that path and then ultimately potentially to work with companies like Betterment.

Mike Reust (22:54):

So I think a lot of clients we see coming to Betterments are very much in this situation where they had some lifetime bank, they probably used it because their parents used it or their company forced them to use it because that's like the 401k was there and it's a bank and a wealth management company together. It's sort of like a default that just sort of happens. It almost happens to you at some point in your life and then eventually you need more and you go out there shopping. And I think that that's just a very big missed opportunity by banks a lot of the time they're focused on their core funnel and they're under appreciating the disintermediation risk that they face medium term. And I think have to head that, you have to confront that sort of head on. It's sort of like the red Queen economics hypothesis, right?

(23:40):

You got to keep sprinting just to keep in place and to keep surviving and thriving is even that much harder. And so I think you just have to lean into it and you have to get beyond what's plausible in the banking guardrails. In order to do it, you have to step into whatever your customers need most. It might not be wealth management initially. I see a lot of banks that offer, I'll put it in quotes, like a savings account that offers a pretty unimpressive rate and they lose the customers before they even got to the savings. That customer, if they ever talk to anyone who's helping them with financial planning, the first thing they're going to say is have an emergency fund. It's probably a certain number of months of your expenses of living. Then make sure you're paying down the worst debt, then have probably a slightly bigger emergency fund, then start saving long-term retirement comes in there depending on your employer match situation, et cetera.

(24:27):

But in any case, my point is I see banks losing customers before they even get to the savings account even before they're thinking about that. And so you have to compete there and it might be tough based on your cost of capital to compete with a high yield savings account player in the world, but maybe that's when you have to go back to partnerships or thinking about it a little differently and have that not be a long-term driver of your business. And I'm not trying to tell everyone to become NBKC, but just take a slightly different approach to how you're going to build a long-term sustainable business on your customer base.

Holly Sraeel (24:55):

Now you said to date that you Betterment was having to knock on a lot of bank doors to get a dialogue started. Do you see that that will even out over time, you'll see more banks coming to you to establish relationships or what do you think? I mean are we at, I mean as I look at it, banks really need to make a move now or they're going to lose great ground. So tell me how you think it's going to go over the next year or so?

Mike Reust (25:29):

I want to believe banks will do that. I am not convinced, I just simply don't see it. The reason I care about it, I don't know how many banks the US should have. I don't know if it's 4,000, I don't know what the number is, but I sort of liken it to the situation in journalism, right? We talked a little bit about this where you've seen, I think it's like a sad outcome for our society that a lot of local journalism has dissipated and disappeared. I think that that's an important mechanism in our society. And I think a similar thing, it's different but very similar in that local banks allow communities to thrive to do lending and otherwise like God help us if we enter a society where the only way for a small business to get a starting loan is to hope the AI powered approval process at some distant tech company gives 'em a thumbs up.

(26:15):

I don't know, that's a little bit of a scary world. I'd like there to be more competition for folks at the local level that have a little bit more empathy for what's going on at the local level are able to service and just have a little bit more of that commitment. So that's a little bit why I care about it. And the reason I'm sad I'm not seeing that commitment is this recent example I talked about. This is a very simple use case like originating a mortgage, having the ability to offer a very competitive rate by having another mechanism that drives some revenue into the relationship, the relationship discount. When we first started talking about that idea internally, it's just a thing we should think about doing. I was like, cool, we're going to call up some banks, we're going to reach out to them and we're going to have a conversation and they're going to tell us why it's stupid, right?

(26:54):

This is not a super crazy, this is very obvious idea if you care about these corners. And I was like, they're going to tell us why we're stupid and why it's illegal or why it's terrible or why it doesn't work or whatever. And I talked to five banks in two weeks and they were all ecstatic and thrilled and asking for exclusive partnership access to this program after we modeled out the economics and what the relationship could look like, I was like, what's happening? None of these mechanisms are brand new in the world. How is no one pursuing this as an obvious competitive disadvantage you have in this particular space as a bank? And so that's just one example and I don't want to over index on it, but it illustrates what I feel more broadly. In other cases over the past seven or eight years where betterment's been focused on banking in addition to wealth management, I just see that more and more over time. And again, the moment it gets a little bit scary or a little bit hard, it tends to default back to the position. No, that's not what we do. That's a new thing and it's a little scary. We're all set. Thank you very much. And so I'm not sure I see as enough ambition or gumption across the banking space as I'd like to believe there's going to be thousands of banks in the US and I don't know what timeline, but 10 years, 20 years

Holly Sraeel (28:11):

Sort of a politically charged question, but I got to ask it anyway. Do you think that the current sort of fluid regulatory environment will have a knock on effect that's favorable to more banks pursuing and waiting into wealth management than they might not have decided to pursue say three years ago?

Mike Reust (28:37):

I think there's a few very tangible examples where you'll see that I think you're going to see crypto and 4 0 1 ks more than you would've otherwise. So I think there are some very real, very crystal clear examples based on regulatory changes. But I think more broadly, we all have the experience. If we've worked in any sort of risk management in a regulated space, it's not super important what's happening just today. It's super important what you're doing today, and that will remain important years to come, right? When you get examed, it depends a little bit on your exact space, but across banking and wealth management's typically the case that if you're examined in 2000 and I don't know, 30, they might care about what you were doing in 2025 or 2026. So you still have to have that sort of reinforces a little bit of the conservatism I talk about where it's like, what are regulations today? What are they likely to be today or tomorrow? Do you think we'll have another administration change and it'll swing back the other way. And I don't know the credit, the Bureau of Consumer Protection might come back in a way that's potent. Yeah, I would think about that. I wouldn't advise Betterment or banks to pretend all of the changes are sustainable and everything that is okay today or seems to be okay today won't be get a little bit of a finger wag in a future exam. Yeah,

Holly Sraeel (29:56):

It's a long game. So I want to turn the session, open it up to some questions. Do we have questions? I have a microphone. Bailey, one of my team members rushing over. Thank you. Huh? Oh, I know, I know.

Audience Member 1 (30:16):

I'm on it. Thank you. Just a clarification, is Betterman a broker dealer?

Mike Reust (30:21):

I'm so sorry. I can't.

Audience Member 1 (30:22):

Is Betterman a broker dealer?

Mike Reust (30:25):

I'm sorry?

Audience Member 1 (30:25):

Are you a broker dealer? Are you a broker dealer?

Mike Reust (30:28):

Yeah, Betterment is a broker dealer and an RIA, it's title like all in One package.

Audience Member 1 (30:33):

Okay, thank you. There's a question in the center there.

Audience Member 2 (30:43):

As Betterment evaluates program banks and partner banks, what are the things that you look for given that competitive environment and as program banks are looking for more return and more partnerships with wealth advisors?

Mike Reust (30:58):

I'm often interested in not treating it. I often run it, the default is it's a commodity, it's just like an agreement. You can hold a few hundred million at a certain rate done, no big deal. And it's become that way because there are these players in the middle Inify, others who sort of created that space. I actually, and that's fine, we'll play that game and we will happily take the highest bidder and offer as competitive a rate as we can as a result. But I'm pretty interested in bigger, more direct relationships where we actually skip the intermediaries and Betterment directly interacts with the firm and the money's flowing directly. We have a more tight-knit relationship and I can get a phone call and be like, Hey, we got to swing a billion dollars out over the next quarter and it'll be fine. We'll manage it. We have other partners that we can balance it with and it's no big deal in the same way that I can talk to them about us having like, Hey, we're just a little tight on capacity, we need a little bit more. Can you do us a solid? So I found a lot of benefit in having those deeper relationships and as I mentioned, those who are open to treating it as core deposits is also a win for everyone given the primary person exemption, which allows us to do that

Holly Sraeel (32:05):

All we have time for one more question. Alright, two if you're quick.

Audience Member 3 (32:09):

Alright, thanks. So the Rob advisor space has seen mixed success. You've seen a UM growth user adoption, however profitability differentiation seems to be challenged. How do you guys think about the evolution of that product? Thank you.

Mike Reust (32:26):

Differentiation is increasingly tough. The good news for the upstarts like us is that most of the incumbents have mostly given up because they can't make the economics work at the account size scale that we can. And so that allows us to continue to compete and attract customers early on. We've been profitable for years. A couple other, the upstart robos have been profitable for a long time, so we're feeling pretty good about our growth in the future. There were tough moments at times, but balancing it out with banking and cash really helped us through good complicated rate environments and we've all come out quite a bit stronger on the other side.

Holly Sraeel (33:00):

Alright guys, we're at time. Oh, one more and then I got to get off the stage.

Audience Member 4 (33:04):

I make it quick. So from a customer segment standpoint, wealth transfer is happening, women are entering into the investment space. So what are you thinking about from a product roadmap standpoint? How do you equip women to invest more using RoboAdvisor?

Mike Reust (33:22):

A lot of it is empathy in marketing and ensuring that your brand and the emotional connection is resonant with any segment you're targeting. Whether or not it's male or female. We also target various spaces that cater to different genders or different whatever segment of the market we're struggling to target. We will take that approach. We also bought the most women-centric robo lves recently and absorbed their assets and that was actually pretty successful. I'll just point out we bought the business and retained, I can't share the exact number, but the absolute vast majority of it, and it's been a long time. We actually weren't sure it exceeded our expectations. We thought we were good at appealing to both genders, but that elves was better at women of course, because that's been their whole focus from the beginning. But we exceeded what we expected there. So those are just some of the quick thoughts. Sorry.

Holly Sraeel (34:12):

Alright, listen, Mike can hang around if you guys want to talk to him. I need to jump because I got to be on another stage in two minutes. But please join me in thanking Mike for his observations today.