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Sallie Krawcheck knows what it is like to be one of the few women in the room.
She led the wealth management business of a major Wall Street firm, Merrill Lynch, before becoming the co-founder and CEO of a venture capital backed-financial technology company — roles not traditionally occupied by women.
Her company, Ellevest, is focused primarily on helping women invest.
Since its founding in 2014, the company has sought to build a client base of investors, not traders. By Krawcheck’s account, the company has successfully done just that, with high recurring deposits and net inflows into its digital business for every week this year.
The odds were steep for the company to get to where it is today, Krawcheck admits. As other competitors have fallen away, that has brought Ellevest closer to its goal to be the “No. 1 investing platform for women,” she said.
Krawcheck is focused on helping women do exactly the same with their money — beating the odds that are stacked against them — so they can achieve financial security.
CNBC.com recently caught up with Krawcheck on Ellevest’s development to date and how women can better build wealth.
(Editor’s note: This interview has been condensed and edited for clarity.)
Lorie Konish: You were previously at the helm of a major Wall Street firm’s wealth management business, which is predominantly male, and then founded this investing platform for women. What inspired you to do that?
Sallie Krawcheck: Shame on me if I had not, given the experience that I had and given my recognition that women were simply not investing as much as men are. It was being dismissed as, “Oh, they’re just not risk tolerant. They are risk averse.”
Not to go out and at least try to build something for women to help them close their gender investing gap, the gender wealth gap, help them make more money, help them therefore live bigger lives, help them leave jobs they hate, help them leave relationships that are bad for them, having worked at and run big platforms — shame on me if I had not seen this issue, gone out and built something like Ellevest.
LK: What can Ellevest do differently for women that other investing platforms can’t?
SK: We didn’t launch until the end of 2016, almost two years after we started. It was doing deep research on what would engage her with investing and what was missing. And there were things that we discovered were needed. For example, recognizing gender in our investing algorithm, maybe not for the reasons you think.
The reason is she lives longer. She earns less. She takes more career breaks. Her salary peaks sooner. If you assume she’s average, you may assume she makes too much money and she dies earlier, which means she could run out of money.
LK: What has surprised you about female investors as you have built the platform?
SK: They’re not risk averse. They will take on more risk than men, in some cases, and should, because if they’re living longer, then they have the opportunity to take on greater risk. Women are risk aware, so it’s a matter of explaining to them what that risk actually means. “Am I tracking towards my goal? I see the market just went down. Am I still tracking towards my goal? If I’m not, what do I need to do?”
On the Ellevest platform, we show how people are they tracking within the parameters of the expectations, will they still reach their goal?
LK: Has the Covid-19 pandemic shed light on these issues?
SK: Oh, my gosh, in so many ways — as did the election of Donald Trump, as did some of the moves in different states to restrict the right to choose. All of those things for women have helped them recognize that Prince Charming probably isn’t riding up on the white horse. Prince Charming is government with social safety nets, etc. Women lost a lot of ground in the pandemic, and so it’s hard to ignore it at this stage.
LK: You’ve talked about a “she-cession” in the Covid-19 pandemic. Are we still in it?
SK: There are months in which things are better. More women have returned to work. But I think the impact is long-lasting, even for those women who were forced to step out of the workforce and perhaps have returned. They will never get those earnings back. They will never get the compounding of those earnings back. They will never get the 401(k) and Social Security contributions they didn’t make back.
Wealth is compounding. Lack of wealth, debt is also compounding. Women haven’t invested as much as men have, so they haven’t had the positive effect of the compounding. And they’ve had more debt than men have, particularly credit card debt and student loan debt, so they’ve had the negative effect of that.
LK: What steps can women take to recover?
SK: One step is recognizing all of the negative messages she’s getting around money and not buying into them. There’s research that says that 72% of money articles or money media for men is very positive. Growing abundance, trading, investing, bitcoin, meme stocks. You can argue whether it’s accurate, but it’s abundance.
The messages to women tend to be scarcity, whether it’s all about budgeting and making a dollar go further. Or it’s “don’t be so frivolous.” It’s “if you can just coupon clip, you can get your way out of it.” Whereas men feel empowered when it comes to money, women feel disempowered and feel scarcity and shame.
There’s no amount of money women earn that they don’t feel embarrassed about, ashamed about. You just have to reject that. And the old women won’t buy a house because they think they’ll be a more attractive marriage prospect if they don’t. That is poisonous, misogynistic nonsense. And we have to reject that.
LK: A lot of advice for women talks about asking for a raise and starting to invest. Where does it go beyond that?
SK: Absolutely everyone should ask for a raise. And if over time, you’re not getting the raise and you see people being promoted who represent the majority and not you, you may want to ask for another job. I do realize that comes from a place of privilege, but if you’re able to. From there, it moves to getting your high interest rate debt paid down, to investing in your 401(k) in order to get the match, if that exists, building an emergency fund, and then investing in a diversified investment portfolio with someone like Ellevest.
It doesn’t have to get more complicated than that. It doesn’t have to be your full-time hobby. If you do those things and you put aside 20% of your take-home pay to doing those things, over time that has shown historically that you can make it through the economic ups and downs that we typically see.
LK: How can the men in these women’s lives help them advance?
SK: It’s funny, because when we launched Ellevest, we got push back from the traditional industry. We got hate mail from some of my Wall Street friends. What’s happened, over time, is as their daughters begin to age into their first jobs, one, they’re sending their resumes to me, and two, they’re like, “You know what? As I’m watching the issues that my daughter is facing, I’m realizing the need for an Ellevest. She’s coming home from her job, and saying her boss is promoting all the guys and taking them all out to play golf. As I look through my daughter’s eyes, I’m seeing the money inequities.”
It’s important for dads to know that their relationship with their daughter is certainly one of the most important of her life. And there’s even research that shows it’s the jumping off point for her confidence in business. So if she’s running into some of this gender nonsense, she’s like, “Yeah, but my dad believes in me,” and that builds a lot of confidence.
LK: What advice do you have for younger female investors who are just starting out?
SK: The best day to invest was yesterday. If you didn’t do it yesterday, the next best day to invest is today. I don’t think any of us correctly conceptualize the power of compounding. It’s sort of a tricky thing to explain, earning returns and then returns on returns and returns on returns on returns. If you can begin to invest even small sums early and allow them to compound through market ups and market downs and so on, you historically have been pleasantly surprised about what the growth of that money has been.
I think just starting with whatever you can and viewing yourself as an investor. And you don’t have to get pressured. There’s sort of this, “Are you in bitcoin? Are you in all of these things?” If you want to, great, but that’s trading. And make sure that’s money that you can lose, and view it in that way. Going all in because you think there’s a bet to be made is not a good thing. You could have perfectly foreseen that cars would take over our streets and the world and still have lost a lot of money betting on it, because there were so many car companies and then so many of them went under. All of the things the bulls are saying could come true. You may still lose everything.
LK: A lot of people are on either one side or the other when it comes to bitcoin and cryptocurrencies. Do you have a view on that?
SK: Can I be in the middle? The idea of having a global currency is an appealing one. For so long, it’s been gold, which has its limitations. But as to what flavor is going to win out and how pervasive it’s going to be, I don’t know. But there’s certainly something there, for sure.