How will women shape the future of investing? Longtime Wall Street leader Sallie Krawcheck, co-founder and CEO of Ellevest, joins Chana Schoenberger, Editor-in-Chief of American Banker, to discuss gender-lens investing and the role of women in the markets. A former Most Powerful Women in Banking honoree, Krawcheck will talk about her journey to entrepreneurship after decades as an executive at large institutions.
Transcript:
Chana Schoenberger:
Hello. Thanks for joining us. I'm Chana Schoenberger. I'm the Editor-in-Chief of American Banker. And with me I have Sally Krawcheck, who is the CEO and founder of Ellevest. Ellevest is an investing platform for women. And so let's just jump right in here. You have had quite a career thus far. You led banks, now you're a founder. How did you get where you are now? Short version.
Sallie Krawcheck:
What characteristics it took or what was the actual path?
Chana Schoenberger:
So what was the path and then how so few women rise to the top? You managed it. How'd you do it?
Sallie Krawcheck:
A series of fortunate and sometimes unfortunate events. I would say
Chana Schoenberger:
That's the Lemony Snicket version.
Sallie Krawcheck:
Yeah. As we were talking about before, I didn't grow up in Charleston, South Carolina thinking I want to go to Wall Street or I really want to be in the investing industry. I came here to New York to do it because it's what you did in the mid to late eighties, just as kids go to Silicon Valley today. And then they tried to throw me out. There was no unconscious bias. There was like, we don't want women in this industry at Salomon Brothers in the late eighties. And so at that point I'm like, oh, I am in and I'm in for the duration. So I was a miserable investment banker in my twenties. I was a very happy sell side research analyst covering banks and Wall Street. In my thirties, I became director of research of Sanford Bernstein, in my mid to late thirties. My claim to fame then was I took Bernstein analysts out of the conflicted investment banking business. I looked at this and said, we're doing research and giving stock recommendations to individuals and institutions. We want them to buy low. And we're also advising companies who want to issue stock. They want to issue high. That seems like a conflict. So I took us out. We lost millions of dollars from doing that. The internet bubble burst, and while other Wall Street firms paid hundreds of millions of dollars in fines, our business went vertical then.
Chana Schoenberger:
So it turns out that regulators agreed with you.
Sallie Krawcheck:
Elliot Spitzer and regulators agreed with me. And then Sandy Weill, who I'd known, because I covered Travelers, called me and said, our research department's a mess. Can you come and turn it around? And I said, no thank you. And he said, what if you run Smith Barney also? And I said, that could be interesting. And so went from running 280 people on a Wednesday to 35,000, 40,000 the next day. Wow. I became, turned it around, became CFO of Citigroup for a period of time, then ran the private bank and Smith Barney. And my second claim to fame is I am the only woman who's gotten fired on the front page of the Wall Street Journal twice. So the first time we have laughter on the here. Yeah, it was fun for me too. Really a good time. They all laugh now, but the first time was because I recommended partially reimbursing clients for losses in the subprime crisis.
Not because that's what you do, but because we'd the products, I wanted the board, but I was fired. And then I was brought in to turnaround Merrill when Ken Lewis and Bank of America bought it, had that job for two years, then got the numbers turned around, and then was said, now that you've turned it, now that we put you out on that glass cliff, Sallie, now that it's no longer a glass, we are going to move on to someone who's more of a business as usual manager. And so at that point thought, hon, maybe I'm not going to go right back to a big firm. Spent a little bit of time trying to think what my next move was. I wanted to be something that have real impact and have a real positive impact on lives, particularly women's lives. And so saw a big hole in the market for helping women invest in and founded Ellevest. Was that fast enough? That was pretty fast. Yeah. Pretty fast, right? Yeah. Okay.
Chana Schoenberger:
So for those of us who, many of the viewers may not be historians of Wall Street, what is Smith Barney now?
Sallie Krawcheck:
We found Smith Barney was bought by Morgan Stanley and so was merged into it. Salomon Brothers was bought by Smith Barney, merged into them, became part of Travelers. And I think parts of it are still there.
Chana Schoenberger:
There's got to be a brisk eBay business in those old banker bags that have the tape with the names. There are firms that don't exist anymore.
Sallie Krawcheck:
It's the way of the industry, in part because the leverage of the industry has been so high. So the highs are high and the lows are really low. And some of these firms find it difficult to survive through the course of a cycle.
Chana Schoenberger:
Which is a spectacular flame out for some, which we've seen so far this year.
Sallie Krawcheck:
Yeah, we have indeed. We have indeed.
Chana Schoenberger:
So when we launched our Most Powerful Women in Banking list, which was 21 years ago, you were number one at the time. You were.
Sallie Krawcheck:
When I was eight years old, I was number one.
Chana Schoenberger:
Well, you're 29 now, right?
Sallie Krawcheck:
Yes. Crazy.
Chana Schoenberger:
Amazingly amazing. At the time you were the CEO of Smith Barney, so that was not super recently. What's changed for women executives in banking since that?
Sallie Krawcheck:
Not enough.
Chana Schoenberger:
Not enough.
Sallie Krawcheck:
I have Jane Fraser who is running Citi. Yes. Who I think is a spectacular talent and I think is doing a great job at what is one of the hardest jobs certainly in the world, but the very fact that we can name her, right, as opposed to name all the men who are the CEOs of banks.
Chana Schoenberger:
They're all named John.
Sallie Krawcheck:
A number are named John, in fact. Yes.
Chana Schoenberger:
Actually we're looking at the list of the 50 largest banks by assets. I mentioned this, and Jane is the only woman on that list.
Sallie Krawcheck:
Yeah, look, it's an industry that has tilted very male and very masculine. When you go over to the investing side, which is where I spend my time, 98% of mutual fund dollars are managed by men. 86% of financial advisors are men. 90 plus percent of traders are men. You go to venture, women get 2% of venture investing dollars. So these industries, there has been some change, but it's been slow and it's been slow to get to the senior levels. If you had asked me 21 years ago where I thought we would be now, it would not be here.
Chana Schoenberger:
Well, we were supposed to have flying cars
Sallie Krawcheck:
And more women in senior leadership roles.
Chana Schoenberger:
Yes. Flying the cars or being flown around in cars. Are there any optimistic signs that you see for the many women execs who came after you and aimed for the top?
Sallie Krawcheck:
Well, I think there has been more progress, and there's certainly attention to it. And there is on any given day. Another piece of research that shows that diverse leadership teams pick your great statistic, whether it's diverse leadership teams drive higher returns on equity, not by little by lot, drive lower risk, drive greater innovation, drive greater employee engagement, drive greater customer engagement. Diverse teams have been shown to outperform smarter teams. Every bit of research indicates that you want to get that diversity, not just diversity of gender, but diversity of all kinds. So you're getting the different perspectives in the room. And so that research does give me optimism. There is some progress. It just hasn't been nearly as much as you thought it would be in 20 plus years. Part of the issue was the subprime crisis, which put us back by quite some amount that diversity in those year, the years after the subprime crisis, you might have thought, oh, well, it'll become more diverse because we'll be looking for that lower risk. The opposite happened in what I saw happen in the industry at the time is we'd love to put someone who brings diversity to the table, but we just can't take that risk now, rather than recognizing it was the opposite.
Chana Schoenberger:
Right? We need a safe manager and that means the guy we play golf with.
Sallie Krawcheck:
And it means someone that I says senior exec can intuitively trust. And so that intuition of course, leads us to people who are like us because we can sort of finish the sentence.
Chana Schoenberger:
It's a heuristic. I mean, at the time in the financial crisis, there was all sorts of people said, well, if it had been Lehman Sisters instead of Lehman Brothers, we wouldn't be in this mess. And yeah, there's, there hasn't been a lot of, oh,
Sallie Krawcheck:
Of course I look, there is research that non-diverse teams tend to overtrust each other, egg each other on, there's research about testosterone levels on trading floors and how risk rises and falls with that. So maybe Lehman's siblings is better, but there's no doubt. But the disappointing part is it coming out of that financial crisis, we went backwards and we feel the effects of it even today. And the jobs that diverse, the people who bring diversity are offered tend to be glass cliff jobs. I mean, I saw this at Smith Barney, Sandy, if everything was going great and Sandy didn't have a problem to solve, he would've put the next gentleman in line in the job. But the fact that something was wrong, he needed somebody with an outside perspective and somebody who demonstrated that things were going to be different going forward. And then sometimes I think no one else would take the job probably. But that was for sure glass cliff turning around. Merrill Lynch was glass cliff. A lot of these jobs are the ones that here, you try to fix it.
Chana Schoenberger:
And then there's no real risk to the company when if things don't go well because it's like, oh, well, I guess she wasn't up to it.
Sallie Krawcheck:
For sure. And we then tend to say that applies to other women, whereas we don't say that, gosh, that applies to other white men.
Chana Schoenberger:
All women are the same. We do all, yeah,
Sallie Krawcheck:
Exactly. Same. It's totally the same. Completely, very much the same. For sure.
Chana Schoenberger:
Let's talk about Ellevest. So you just raised a series B and you have Melinda Gates as a key investor. Why does she believe in the company? How did the round come together?
Sallie Krawcheck:
Well, you'd have to ask her about what she has said aligns with our belief that, as I love to say, nothing bad happens when women have more money. Just as you talked about the Lehman Sisters. Think about it, what bad things happen when women have more money? The research is clear that society moderates economies grow. Families are better off. That's daughters for sure. It's sons, it's spouses, it's husbands. Nonprofits are better off. We give away a larger percent of our wealth. The climate is better off. We are more likely to believe in the effects of climate change and to spend money in order to fight it. I would argue politics would be better off if we were giving more money to candidates that supported issues that women support. I think we'd be better off. And so we have all this research in developing economies about how when women have more money, they put that money into their families.
The same thing is true in developed economies. The issue and the challenge is we've been going in the wrong direction now. It's been 10 years since we all started leaning in. The gender pay gap has been flat. The gender wealth gap, how much money she has and owns in comparison to men has gone at 30 cents to a white man's dollar, one penny for black women, and has been going backwards even before the pandemic. And if you say all these good things happen when women have more money, and we're sitting here in this angry country where our world is literally burning, how much of that is attached to the fact that these gender wealth disparity and racial wealth disparity has been? And so looking at that and saying, okay, what can I do? What can we do? Well, there's one, there are a lot of money gaps for women, but one that people very rarely spoke about was the gender investing gap, which cost women hundreds of thousands for some women, millions of dollars over the course of their lives.
And look, I saw it when I was at Merrill Lynch. Smith Barney, our client base reflected our advisor base. Sure. Mostly middle-aged to older white men. I love to say perfect product market fit for older white guys. Perfect. They trusted their advisor more than their doctor. But in the year after his death, she leaves their joint financial advisor at a rate of 70 to 90%, no product market fit. She ranks the industry towards the bottom of the industries that serve her. And we always knew why. We said it very confidently. We said, women are risk averse. How many times have you heard that a zillion women are risk averse? Well, that is in fact, one explanation for why she's not investing. Another is maybe she's not buying what we're selling maybe in the industry, whereas we discussed before, it tilts so male, maybe men didn't mean to, wasn't on purpose, wasn't conscious, built a business for themselves, maybe built around trading or a couple years ago crypto or talking large cap value or watching CNBC. And maybe women, that's not how they want to invest. Maybe not, but maybe. And so we founded Ellevest by saying, there's a big market break here. What if we build a company center that centers women and do years of research and find, not that they're risk averse, but that things happen when a man runs into jargon when he's investing, he just plows right through it. Women, that seems like something important. I better go buy a book and figure it out and read about it. And then what's more interesting than a personal finance book,
Everything, the correct answer is everything. And so she doesn't come back.
Chana Schoenberger:
Well, there have been a number of very good personal finance books written by female journalists. Yeah, actually. But yeah, I don't know who's reading them,
Sallie Krawcheck:
You are enjoying them, no doubt.
Chana Schoenberger:
Right. But I'm a business journalist.
Sallie Krawcheck:
There you have it. There you have it.
Chana Schoenberger:
Yes. I had a lovely pair of high school interns last summer who jointly wrote for me an article about financial literacy in schools. And they went out and they called a bunch of banks. They called a bunch of state senators who had put forward a law that went nowhere. Why are we not teaching kids and girls and boys? Why are we not teaching young people about financial literacy? And the answer is because it's not a priority.
Sallie Krawcheck:
It's appalling. I'll tell the story, my son went to school here in Manhattan, and one of the mandatory classes was a woodworking class. Mandatory. Mandatory. Yeah. I can't tell you how awful what he made was, we were so glad when we moved so we could lose it. But
Chana Schoenberger:
How many times
Sallie Krawcheck:
Do you whittle wood? And Jed frigging Clampett, right? But he didn't have a personal finance class. I mean, if we really must have woodworking, could we get rid of trig? Right. Seriously. Do we need trig? Like I am now in my fifties,
Chana Schoenberger:
You don't use trigonometry a lot in your day job.
Sallie Krawcheck:
No. I've not used it one time since 10th grade.
Chana Schoenberger:
Yeah, no, I hear you. Yeah, definitely.
Sallie Krawcheck:
It's pretty appalling.
Chana Schoenberger:
So a point you brought up a minute ago, it was about venture capital. So there are so few women who lead companies in the sector, not banks, but startups, tech companies, and they're getting really none of the venture funding in financial services and FinTech. What can we do about that? At least infinitesimal. So we just did a list here of the most influential women in FinTech. And there are not that many women who are founders. There are a lot of women in the ecosystem.
Sallie Krawcheck:
Where did I rank on that list?
Chana Schoenberger:
I dunno if you're really in FinTech though. Yeah, we
Sallie Krawcheck:
You damn straight. I am. It's financial and it's technology.
Chana Schoenberger:
Fair point.
Sallie Krawcheck:
Okay, well, we'll talk about this next year, I think. But there's,
Chana Schoenberger:
Back to you.
Sallie Krawcheck:
It's outrageous. So first of all, women get 2% of venture funding. Women CEOs, it's ridiculous. We get 1% of FinTech, fin FinTech dollars, we get 1% of series B dollars. That intersection is one in 10,000 series B FinTech dollars. In order to have a successful FinTech, you, they're capital intensive at the beginning in many cases. So you have to raise through the series B, when we were raising the last round for Elvis, our numbers, the fundamentals are really good. And we would go to these meetings and people say, the fundamentals are really good, but you're going to run out of women, but
Chana Schoenberger:
Run out of women. How many women are in this country?
Sallie Krawcheck:
Quite a few. As it turns out, you've scaled through your early adopters. Your CAC is going to go up and it's gone down ever since. But you, you've felt this bias, this an internalized bias that nobody meant it badly, but just like if there, it's hard for me to imagine a world in which women are investing at the same rate as men. And so you could feel it. And so what we did, which nobody's done before, is we did the majority of the raises through a series, bringing wealthy women in, not mega wealthy, but women who were accredited investors or qualified purchasers and forming a series of special purpose vehicles and funding it that way, which had never been done before to the extent we did it. So I was actually brought to the House financial services committee to testify on it, because they are also looking at this issue. They're trying to deify FinTech. And that's a question of how can we get money to women in order to do that?
Chana Schoenberger:
There are a lot of bros.
Sallie Krawcheck:
There are a lot of men. A lot of men. I I, I'll have to go back and look at your list, but usually I say to people name another woman FinTech founder who's raised through it and they, nobody can.
Chana Schoenberger:
Yeah. It's really, it's an interesting community that we had on this list. Lawyers, people who do a bunch of things, but there were not a lot of founders. Lot of tremendous number. Yeah. Okay, we'll start next year. So what is life like for your client right now? Woman, retail investor, what sort of issues is she facing and what can we do about those?
Sallie Krawcheck:
Yeah, it's pretty tough out there. We actually developed Ellevest Women's Financial Health Index to try to take a look exactly this. How's she doing? And there are a lot of different, and we do surveys on this for what is she feeling? What's she worried about? What is she concerned about? One big finding from it is one of her financial worries is a climate. Doesn't matter her age, when she's younger, she tends to be worried about things like the restriction of abortion rights, childcare costs. Women who are more mature older are more worried about inflation, recession, et cetera. But across the way, they're all concerned about climate change and what's happening there. So we looked at, with our index, we looked at a range of things, some of which are reproductive rights, which are an economic issue as well as a social issue and personal issue. Of course, we look at things like inflation. Inflation affects all of us. It affects women more. Why? Because we have less money and we have less wealth. It affects women of color even more. We look at things like representation in Congress. We look at things, we weight them less like the number, the percent of S&P 500 companies that have women CEOs. We look at not so many, not so many, but it has broken 10%. Woo, yay.
We also look at things like what percent of women have paid child leave, et cetera. So at what are women entering or leaving the workforce? And we last updated it, call it three months ago, rock bottom, worse than the pandemic rock bottom because inflation and because of this restriction of reproductive rights.
Chana Schoenberger:
Interesting. So when they're worried about the climate, are they worried about my house will flood? Or is it more I'm concerned about the macro economy and where we're going as a world?
Sallie Krawcheck:
I would say yes. They are worried in everything individual level, and they're worried. It's sort of a macro existential level
Chana Schoenberger:
That's very frightening.
Sallie Krawcheck:
Yeah. Yes.
Chana Schoenberger:
So one of the things you folks do at Ellevest is gender lens investing. Can you talk about that? Why is it important for both women and men?
Sallie Krawcheck:
Well, first of all, we should be clear. We are all gender lens.
Chana Schoenberger:
We all have a gender, right?
Sallie Krawcheck:
Every one of us investing in gender, we're investing 98% in men today, 98, 99%. And so if you then invest with a conscious, intentional gender lens, how do we bring that back such that we are investing in public equities, for example, in more companies with women CEOs or women CFOs or more women on the board. And we also for accredited investors and qualified purchasers, do a lot of private investments where we're getting money directly in the hands of women. And whether that's women running venture funds, investing in women startup CEOs, whether it's getting working capital to women's, small business owners in Latin America where there's not much, whether it's my favorite, an investment we have that fixes up workforce housing in my home states, as it turns out of the Carolinas, in a sustainable way, rented to women in transition, women of victims of domestic abuse. So we look at a range of these investments and really help our clients intentionally invest in women. And obviously I won't talk about performance, but if the research is right, will lead not only to a positive impact, but to superior returns, financial returns. And I am, do not believe that you have to give up returns to invest more positive impact. I think that is dated old thinking. I think you can have your cake and eat it too.
Chana Schoenberger:
So it's not just impact investing, it's actually just investing.
Sallie Krawcheck:
Well, it's inten-- We call it intentional impact investing that I, it's important for me to know what impact my money is having. My money is my power. And so I am voting every day by what I invest in. I'm voting every day by what I buy. I'm voting every day by where I go to work, are my values and alignment across those things. And it's hard, right? Because Amazon is just so easy.
Chana Schoenberger:
Amazon is really easy. I mean,
Sallie Krawcheck:
I'm like, I not even wanted the same day. Just keep it ,right. Stop. Quit sending me all these boxes the same day. It's too much. But you know, get a little used to it. And I bought some new shoes. They took a whole week. What? I know. I'm like, I want to wear them now.
Chana Schoenberger:
Yeah, that is a problem. Okay. So what is the coolest thing that you've seen in finance and investing recently outside of Ellevest?
Sallie Krawcheck:
It's only all I think about. Seriously. It's all I think about.
Chana Schoenberger:
Something cool that you've read about, have used as a customer. Nothing? You guys are the only cool company on Earth. Yeah, the coolest company.
Sallie Krawcheck:
I don't think about anybody. Anything else?
Chana Schoenberger:
What is next for Ellevest? What are you going to do with all the money you raised?
Sallie Krawcheck:
Well, we're spending it on salaries, et cetera. We have a lot of runways. So we help women invest from their first dollar through to multiple tens of millions of dollars. And we provide a digital first experience in those earlier ages. And then we're really, where we're going next is we're really leaning into financial planning. And so providing her with that certified financial planner when she needs a full plan, when she's about to get married, when she's about to get divorced, she's about to have a kid, about to blah, blah, blah, the promotion, et cetera. And then she'll graduate to a full-time financial advisor. And so some people try to, you're a robo, you're a Merrill. No, we're all of it. We engage with her both online and through a human being as she chooses and what's right for her along the way. And so we have tons of runway from here.
Chana Schoenberger:
Are you seeing real differences in the ages of your clients in terms of what they want?
Sallie Krawcheck:
Not more life stage as opposed to age. Because you can get married at 26 and you can get married at 46, and you can get divorced at 27, and you can get divorced at 65 and he can drop dead at also any point in time. And so we tend to, what you really tends to unite our women is they have agency over their money. They may have inherited it, but they really made it. And it's in all 50 states plus the territories. They are confident and competent in areas of their life, but they never found a great money fit for them. They went to visit with a financial, or their dad introduced him to his financial advisor, and it didn't feel right. They went to a couple of websites and they ran into jargon and they didn't feel supported. Overall, they don't feel seen. We had one, I won't share the name, but a flat out movie star, flat out all kinds of awards in on her bookshelves, flat out movie star. And she came to us and said her financial advisor never would look at her, look just at her husband. And she didn't quite say it, but it was like, do you know who I am? Do who made the money? And she never found that fit. And it can be hard to, and so we hear from women and male allies because they don't feel seen and they don't feel like they've been able to invest in a way that really speaks to them and sings for them.
Chana Schoenberger:
Yeah, no, I've had that experience where I have to ask the questions in order to get the advisor to look at me. Right.
Sallie Krawcheck:
Well, we used to do research when I was at the big firms where we would put them in a room with a couple, and so we're just going to observe. And the meeting would happen and they would leave and we'd say, what do you think was the split between him and her? How much you talked to them. And he'd say, well, we talked about football for a couple minutes, blah, blah. So it was probably 55, 45 or 60 40, and we're like 80 20. And they don't mean, you know, don't mean it, but of course you're drawn to people who you know, have an easy back and forth with as opposed to someone who maybe you just don't connect with as much.
So there's been a huge movement in the financial advice industry to get more women advisors. How is that going?
I don't know. I'm not there anymore, but I think the numbers are still pretty low. We see quite a few women come in at more junior levels. They tend to leave more quickly. And some of that is because their books of business don't grow as quickly.
Chana Schoenberger:
Interesting. Okay. Fascinating. All right. So this was sort of optimistic a little bit, not little bit pessimistic, but
Sallie Krawcheck:
Overall I'm frustrated. We haven't moved more quickly, particularly because the research tells us we should. And you just want to say we're an analytical industry. Why aren't we running it on the analytics? But human nature is so strong, the drive to for comfort and to be with people who intuitively you believe will be successful. It overrides the research
Chana Schoenberger:
Heuristics versus data.
Sallie Krawcheck:
And I was a little discouraged after our raise because I thought if with our numbers, and frankly I've been around for a while, I can get a meeting. When I think about the young women out there trying to start their FinTech business, how do you even get a meeting. And I can get a meeting. But just the no and no. And every woman you ever speak to about raising money. No, no, no, no, no. And think of all the companies that don't make it through that. And think of all the ones that do, where you're spending 50 or a hundred times more time than a similarly situated man to raise the money, which it means it's a very full-time job, which means you're not building your business, which is already the hardest thing. So that's discouraging, and I was discouraged after that. But if we at Ellevest can make women rich, there's a ripple effect to that. That's awfully powerful.
Chana Schoenberger:
Great. Well thank you so much, Sallie. I really appreciate coming in today.
Sallie Krawcheck:
Happy to be here with this beautiful view on this beautiful day.
Chana Schoenberger:
Yes. Lady Liberty. Yeah, the original woman in power.
Sallie Krawcheck:
And I'm not on your FinTech list.
Chana Schoenberger:
We'll talk more about this.
Sallie Krawcheck:
Yeah, yeah. We will talk more about this, believe me. We'll talk more about this.
Chana Schoenberger:
Thank you.
