Betterment and Wealthfront crash during market bloodbath

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Betterment and Wealthfront crash during market bloodbath

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  • Two of the largest roboadvisers crashed on Monday during a marketwide bloodbath.
  • Roboadvisers came into existence just after the financial crisis, and haven't seen a major market correction.


Two of the largest roboadvisers crashed on Monday as US stock markets witnessed their largest decline in over six years.

Users of Betterment, which manages more than $10 billion, couldn't log in Monday afternoon when the market started dropping sharply. Wealthfront users faced similar issues, according to a Bloomberg News report. The Dow Jones Industrial Average shed more than 1,000 points and the VIX, a gauge of market anxiety, more than doubled in a matter of hours.

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A spokesman for Betterment told Business Insider the crash was a result of "particularly high volume." Customers of the New York-based firm couldn't log into their accounts for 30 minutes.

"Accounts were secure throughout and portfolio management activities like rebalancing and tax loss harvesting continued," the spokesman said.

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Wealthfront's site was also down for a short period of time, according to Bloomberg.

Roboadvisers entered the markets soon after the financial crisis, and some market watchers have questioned whether robos, which rely more on automation than human financial advisers, could survive a correction. The skeptics argue that if investors don't have someone to hold their hand when the going gets tough, then they'll pull out.

Betterment's CEO and founder, Jon Stein, once told Business Insider he doesn't think pure robos have to worry about a correction.

"If you talk to customers and ask them, 'What do you want from your financial adviser?' they don't say, 'We really want someone who is going to be there for me during a downturn," Stein said.

In Stein's view, customers want peace of mind about their money.

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"Peace of mind is related to the idea that you can talk to someone, but it is not actually, 'I want someone to hold my hand in a downturn,'" he said."Rather, it is more like, 'I want to know that my financial adviser is on my side.'"