I like what these guys, SigFig, Personal Capital and others are doing to shake up the wealth management space. However you certainly need plenty of dry gunpowder to build a successful B2C wealth management business. It takes scale to make money and to get scale you need to spend a lot of money to acquire a bunch of customers (and their assets). As the article here points out, on $500M of Assets Under Management, Betterment are probably making around $1.75M per year in fees.
Betterment, with 50 employees, currently manages $500 million in assets, a number that grows by about 10% monthly according to CEO Jon Stein. Wealthfront, a rival, manages about $800 million. Wealthfront requires customers to invest a minimum of $5,000 through the service. Betterment customers can invest as little as they like. Stein, 34, describes the service as a mix of sophisticated financial technology and behavioral science. “We find that we help our customers get a better investment return by limiting some behavior,” he says. Betterment clients tend to avoid timing the market and the company automatically rebalances most portfolios. The company’s director of behavioral finance previously worked as a behavioral finance specialist at Barclays