Influencers with Andy Serwer: Sallie Krawcheck

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In this episode of Influencers, Andy sits down with Ellevest CEO and Co-Founder Sallie Krawcheck, for a discussion about how the Ellevest platform uses an algorithm tailored for women as well as the possibility of a recession, and the meme stock craze being ‘bro-ey.’

Video Transcript

[MUSIC PLAYING]

In this episode of Influencers, Ellevest Co-founder and CEO Sallie Krawcheck.

SALLIE KRAWCHECK: The gender pay gap has slowly, not fast enough, has slowly been getting better. The gender wealth gap has been getting worse. When young women stop me on the street, they see an Ellevest bag and thank me. The whole thing is just– it just is– is just so worth it. The market is so often wrong but is the best we got.

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ANDY SERWER: Hello, everyone and welcome to Influencers. I’m Andy Serwer. And welcome to our guest, Sallie Krawcheck, CEO and co-founder of the financial platform Ellevest. Sallie, great to see you.

SALLIE KRAWCHECK: Hey, Andy. Great to be here. Thanks for having me.

ANDY SERWER: So I think some people are familiar with Ellevest, maybe not everybody. It defines itself as a financial platform for women. What differentiates it, Sallie, from other say male dominated platforms?

SALLIE KRAWCHECK: Yeah, well, first of all, I’d say we’re the number one financial platform for women in numerous ways. There have been numerous marketing initiatives for women to encourage them to invest over the years. And Ellevest is really the first that’s truly engaged women with their money. What is different? So much.

This is not a, hey, you go girl. Let’s invest together initiative. We change the product from the ground up. We spent two years doing research on what would engage women with their money.

And we built a bunch of what we would say are must haves, such as an investing algorithm that know she’s a woman. That matters because she lives longer. She earns less. Her salary peak sooner. She takes more career breaks.

Getting that information from her is important. We then provide super bespoke investment portfolios that are built for each of her individual goals. And then we have things that she wants, like investing for impact. For women, it’s truly important for them to at least understand what impact investing is and where their money is going.

ANDY SERWER: I want to drill down into the algorithm a little bit that you just mentioned, Sallie, because it does account for, I guess, different outcomes or different paths that women take. There’s pay gaps, career breaks, longer life expectancy. And so how does that work for the algorithm in terms of what it provides for your customers?

SALLIE KRAWCHECK: Yeah, well, first of all, I would step back and say we see it again and again in business and in our society that we’ll say this is for everyone when in fact it’s based on research done with men, et cetera. So we all know heart attacks, right? For years, women have died at heart attack at two high rate because the symptoms that doctors were looking for were those that men manifest. Crash dummies built in the image of men.

And so I would argue that so much of the investing industry where as you know 98% of mutual funds dollars are managed by men, and something like 99% of investment dollars are managed by company’s majority owned by white men. That as they were building something that they thought this is for everybody. They did as we tend to do build it for themselves.

And so the investing was trading, buy low, sell high, the gamification of it. What we found at Ellevest is that women are really looking to reach their goals. And so what we built was an investing algorithm that is 100% based around getting her to that goal. See, in 70% of markets, for example, I want to buy a house in five years.

And this how Ellevest helps her calculate this is how much you can afford. This is what you need to input. That’s what the investing algorithm does. And then I want to have a baby in x number of years. I want to retire in y number of years.

And so the inputs in the algorithm tend to say oh, your salary is going to peak sooner, right? Oh, you’ve got a PhD in computer science, and you’re a middle manager in New York. OK, this is what your wealth will look like over time, which is different from what a man’s would be in a similar position. And so adjust the deposits she needs to make. Adjust how much– anyway, adjust.

ANDY SERWER: Right. Right, there are differences, and the algorithm accounts for that. And what about the model, Sallie? There is a subscription model with different tiers. You’ve got one on one coaching on top of that. How did you come on– how did you decide to– that model would work and there other sources of revenue?

SALLIE KRAWCHECK: Well, it’s so interesting because what we had to do is go in and say what’s out there doesn’t work for her today. You and I and Andy have spoken about when a woman has a relationship, when she’s married to a gentleman, and he passes away. She tends to leave their joint financial advisor 80% plus of the time over the next year.

When you look to fintechs and particularly wealth tax, most of them, the majority of the folks who they’re downloading are men. We are the one where it’s 90% plus women who are doing the downloading. And so you have to start from a place of what is out there isn’t working. Now I’m going to be open minded.

And what was such a really interesting discovery is during the pandemic when we were still investing only. And we reached out to women. What can we do for you? We stopped everything. We were just going to answer any money question you have. And we started to hear things like, I want help making more money at work.

And my initial reaction having grown up on traditional Wall Street is, well, that’s ridiculous. That’s not what financial companies do. And the team is like, let’s try it. And all of a sudden, it took off. And so as we moved away from being investing only. And we’re providing banking as well as money coaching, career coaching.

And then for some women, private wealth advisors, we said, you know what. Let’s find a way to engage with her. That is a fair exchange of value. And a finding that we had is that– and sort of basis points, which is how the industry traditionally charges is opaque.

Right, I mean, you know what a basis point is. I know what a basis point is. Most folks they like to basis this point again and how much are they charging? And is that fair? And does that feel right? Whereas $5 a month or $9 a month, got it. Got it. And so we found that it wasn’t that she didn’t– she stayed away when we did basis point pricing, but she– her shoulders just went down when we went to dollar pricing because she can more easily assess that.

ANDY SERWER: Fascinating. And do you do other thing, like commissions on trades or payment for order flow?

SALLIE KRAWCHECK: No. No, no, no, no. Andy, it’s interesting. I’ve spent a lot of years on Wall Street. And we are building the company that we feel proud of, the one that we want our daughters and our sons to work at. And one thing that has kept Wall Street, I think, from gaining as much trust as they would like is hidden fees. And so we– it’s a– here you go, $5 a month.

ANDY SERWER: Well, Wall Street is the king of hidden fees. I mean, look at the NYSE and how much it costs to trade a stock when we started out in the business and where that is now, for instance. And then now there’s blockchain, is the next beyond that. We can talk about that. What about this gender investing gap, though, that you talk about, Sallie? What is that and why is it hard to tap on, and what are you trying to do about that?

SALLIE KRAWCHECK: Well, and it’s part of the even bigger issue, which is the gender wealth gap. You probably hear and talk about the gender pay gap, and women make $0.82 to a White man’s dollar, an equal payday. And it’s slowly moving in the right direc– blah blah blah.

What we miss is, well, how much does she have? How much does she keep versus him? That’s $0.32 to a White man’s dollar. And for Black women it’s a penny. And whereas the gender pay gap has slowly, not fast enough, but slowly been getting better, the gender wealth gap has been getting worse.

One component of that, Andy, is the investing gap that women don’t have as much money to invest as men. But even on a percent of their net worth women keep a larger percent in cash. And so have missed out on the wealth compounds. And so they’ve missed out on that.

And more men have gotten more of that. And at the same time, she’s got more student loan debt. She’s got more credit card debt. So she’s getting hit from the bad part of compounding where you buy the dress that cost $100, and before you know it you pay $200 for it because of the interest, rate, right? And so it’s been widening.

And one way that Ellevest has approached this is absolutely let’s build the product for her. But the other thing we do is we do try to sort of open everyone’s eyes that, hey, ladies, we’re receiving some really damaging money messages out there.

So for men most of the articles in media directed them about money or about abundance, and trading, and buying low, and selling high. And for women, it’s 90% are negative, meaning by this size tie, not that size tie. Don’t get the facial. Don’t buy the latte, sort of like, it’s your– money is scarce and it’s your fault.

And nowhere does it say, do you see this systemic issue where you’re not making as much money as the guys are, and where we just had this pandemic where you had to step out of the workforce. And when their child care needs or elder care needs it falls on you. But you better buy a smaller size tie, lady. Of course, she feels bad about money. And so what we’re also working to do is that sense of loneliness she has, which is her number one or number two emotion, or money building that community so she’s got a place where she feels like she can learn and go with like minded individuals as opposed to sort of a [AUDIO OUT] covered in jargon, what do I do?

ANDY SERWER: Right, hey, I mentioned crypto and blockchain. I don’t think you guys are doing that right now. Why is that? Would you consider doing it? NFTs. And how do you decide whether to go in that or not?

SALLIE KRAWCHECK: Yeah, well, first of all, to be clear, Ellevest started and remains at its core an investing platform. We are not a trading platform. And if folks want to trade, amazing. And there are plenty of places that they can do it. Can crypto become part of a diversified investment portfolio?

I think it can. There’s definitely something there. Now, whether it’s– which type of cryptocurrency it’s going to be and choosing that and all that stuff– remember you could have perfectly called that cars were going to take over all of our roads and all of our lives and still lost a lot of money by investing in the wrong car companies.

And so as with everything in investing, diversification is a positive. Diversification some people have said is the one free lunch in investing. So we wouldn’t– we’re not for trading it. We can certainly see our way to investing in it.

ANDY SERWER: Right, skeptical question, Sallie. A student of mine at Columbia, young woman actually, asked me about pinkwashing as she characterized it and specifically mentioned your firm and said, oh, isn’t this just a business where it’s making women feel good by checking boxes. And you can put money here, but it doesn’t really do anything.

SALLIE KRAWCHECK: Oh, my gosh. So many thoughts. First of all, even if that was what we were, would that be so bad? Because money is women’s number one source of stress. You know what the number one driver of her confidence in her ability to achieve her future goals?

Doing something about it, opening an investing account, setting up a recurring deposit, opening a savings account, right? That action, that beginning to move towards financial wellness. I’m not talking financial independence– is a driver of confidence in her future, that very act takes a source of stress and turns it into a source of strength.

But, young lady, you have been socialized by this patriarchal society that for women is inferior. And by the way there’s plenty of evidence, right? At the Bic pin, and this is pink, and this cost more and this whatever. If you look at Ellevest and what we are delivering in terms of investing, in terms of the career coaching, and the money coaching, and the private wealth advisors, the exchange of value certainly feels quite– very fair. And it is not just a marketing thing.

We have rebuilt the product from the ground up. We have spent thousands of hours on this research. We are the only company– financial company out there built by women for women. But this is the shame. It’s how we’ve been socialized.

Women can suffer from misogyny, right? There’s no law. We were brought up in the same society that you were. And we including myself when we picture our money manager, we picture a White man. When we picture a CEO, we picture a White man, right?

ANDY SERWER: Yep.

SALLIE KRAWCHECK: And then on top of that because so many of these initiatives have been so patronizing as have some of the investing initiatives that have come out pre Ellevest, that’s our short– we have a shorthand and that’s it.

ANDY SERWER: Got it. How’s the business doing? Do you talk about assets under management profitability aiming to do an IPO, those kinds of things?

SALLIE KRAWCHECK: Yeah, well, the upside is tremendous. I mean, just tremendous. And the brand love just is like unlike anything I’ve seen. And there’re not a lot of fintechs whose brands, Andy, evoke emotion, and Ellevest is one of them.

So if you look at our ADV, we got about $1.4, $1.5 billion of assets under management. We’ve got 100,000 plus customers. We’ve got a community that’s 3 million plus. We’ve got a cost of acquisition that’s best in the industry. We’ve got NPS scores that are really strong. I mean, all the indicators are good, which is why we’ve just raised a $53 million Series B financing round.

ANDY SERWER: Awesome. Congratulations on that. It sounds like you guys are doing great. So you are a long standing Wall Street veteran, ran a number of bulge bracket firms. And you had to deal with clients. And they would ask you, Sallie, what’s the market doing? What’s your view?

So, Sallie, what’s the market doing? What’s your view? Are we really at this sort of sea change moment where the long decline in interest rates is over, and we’re looking at a long inflationary period?

SALLIE KRAWCHECK: No, but you know. You know that. You’ve been doing this long enough. You know that. Look, the market is so often wrong but is the best we got, right? The market is the point of view of traders upon traders upon traders upon portfolio, managers upon individual investors upon mutual fund managers. And it’s the best view of what is out there and what’s going to happen.

Sure, a recession is on the way. I don’t know when, nobody knows when. [AUDIO OUT] inflation will go up, at some point down at some point. That’s why a diversified portfolio is what matters because the number of active managers who correctly call this stuff consistently– you and I both know is a tiny single digit percent. And so we tell our women investing should be sort of boring. Actually, it shouldn’t be all about making the calls.

ANDY SERWER: Yeah, I understand you have a model that we don’t pay attention to the markets necessarily. But are there things, are there developments that you are paying attention to say regulatory moves, politics, macro? Are there things that are changing your thinking?

SALLIE KRAWCHECK: Well, look, I think it is difficult to be a woman who is spending her life working to get money in the hands of more women, therefore working to get more power to women, and not watch what’s going on in state governments around this country and recognize how challenging those moves can be for women and for the financial well-being of women as well. It is difficult to be a woman and see what happened during the pandemic and not be concerned for women.

Jessica Calarco, a sociologist, said, what we learned in the pandemic is the other countries have social safety nets and the US has women. There is a recognition that the progress that women made was built on pretty flimsy infrastructure. And so, yeah, I– it’s hard as a woman who really sees that advancing women is a flat-out positive, getting more money in the hands of women.

There’s nothing bad that happens, nothing, right? The economy grows. When women came into the workforce post World War II, we had this massive boom. Well, now women are being pulled back into the home.

When women have more money, society moderates, their families are better off, nonprofits are better off, women tend to believe more in climate change than men do and are more willing to invest in it, more willing to invest for impact. And so as we watch women moving backwards, I mean, like I can’t believe we’re talking about anything else.

So I’m very concerned about what was going. And Ellevest is looking to play its role in this by being the financial company that really is developed for women rather than developed for men. And women come on and give it a whirl.

ANDY SERWER: Got it. Yeah, and then there are all those statistics about countries led by women versus countries that are run by men. It’s fascinating stuff there.

SALLIE KRAWCHECK: Look, I’m not saying this gender is better than that gender. What I will say is diversity is what’s powerful. Diversity. And that I think we agree. If we’d had more women in senior roles in Wall Street, more people of color, you think the financial crisis would have been worse? No, right? If we had more women running government, do you think there– we’d have the wars we have?

ANDY SERWER: Right. Would we have more wars? Right, I don’t think so.

SALLIE KRAWCHECK: I don’t think so.

ANDY SERWER: I want to ask you about you a little bit. Wow, first of all, we have to do a full disclosure here because the two of us worked together briefly, right? But you’re a recovered financial journalist, so you’re more evolved. You’re a more evolved species part of the species than I am, no doubt, right?

SALLIE KRAWCHECK: Well, were you there when I– so I was a “Fortune” intern in the 1980s. Were you there then?

ANDY SERWER: Yeah.

SALLIE KRAWCHECK: Yeah.

ANDY SERWER: Yeah, right? Yes. But anyway so you started– you majored in journalism in college, right?

SALLIE KRAWCHECK: I did. I did. I wanted to be a business journalist. I went to Wall Street because that was the Silicon Valley of the day and thought I’d get back into journalism. And then I worked “Time” magazine in the business office, the summer of business school. They wouldn’t give me a job. They gave the job to Tay Geithner instead who ended up being– it was the right choice. I mean, you’re like, yeah. Yeah, it would–

ANDY SERWER: You would have been a right choice too. So when you went to Wall Street. And I don’t know how many women were working there and especially as you started to move up the ranks. There were no other women really at all, right?

SALLIE KRAWCHECK: I was the senior woman in Salomon Brothers London when I was 26. [LAUGHS]

ANDY SERWER: Salomon Brothers too, like the “Liar’s Poker.”

SALLIE KRAWCHECK: Oh, I had no idea what I was getting myself into for sure.

ANDY SERWER: Right, did you ever– did you know Michael Lewis back then?

SALLIE KRAWCHECK: No, I think he was gone before I got there. But we missed each other by months.

ANDY SERWER: Right, but so what was that like and what did you learn? I mean, this must have informed this whole process of going through Wall Street and rising to the very top must have really informed your thinking when it came to creating Ellevest, right?

SALLIE KRAWCHECK: Well, for sure. Look, the early years were horrible. There was no implicit bias. They didn’t want us there. It wasn’t implicit–

ANDY SERWER: Because there was no implicit bias, it was explicit bias.

SALLIE KRAWCHECK: It was explicit, like get– I don’t want you on my team. This is not for women. I mean, just the stories I could tell. And, look, I found my way. As you know, I went from Salomon Brothers. I ended up working at Sanford Bernstein.

I managed to without really understanding what I was doing get to a place where I could shine. And it wasn’t about getting on the right team and figuring out the office politics. It’s about having the right research and research that would make people money. And from that, working at the right companies and then being as you know very contrarian.

I was negative when everybody in the industry was told to be positive pre the internet bubble burst. I took Sanford Bernstein out of doing both research and investment banking because of the conflict. It hurt us until our business exploded.

When I ran Smith Barney, I was the only senior exec to partially reimburse clients for mis-sold products during that surprise. So I’ve always sort of having become a research analyst. Andy, I’ve always sort of zigged when other people’s act, and I’ve always been much more comfortable zigging.

And so Ellevest is essentially was born out of the– what are people looking right at but they can’t see. Right, and everybody’s like, yeah, women don’t invest as much. It’s their fault they’re risk averse. And I’m like, maybe, maybe. But maybe there’s another answer. And so that approaching things as a research analyst and a contrarian has been really important in my career.

ANDY SERWER: Let me switch back to Ellevest because I realize I should have asked you this. So is Ellevest more focused on older women who are mid-career and above or what about younger women, and wouldn’t you want to appeal to–

SALLIE KRAWCHECK: Yeah, college to crypt, baby. College to crypt. I was just saying to the team that, you know what we’re focused on? Women who are getting it done. That’s who we’re focused on. And so, yeah, we’ve got from 18 to a hundred plus.

But these are women who– and we obviously adjust the offering for maybe your daughter. She might come in. At a membership, there’s a few bucks a month whereas we’ve got private wealth advisors from the top private banks who are engaging with women who have millions of dollars to invest. And so we’re ambitious. We saw this need from college to crypt. And we are filling that space.

ANDY SERWER: Yeah, are you seeing this wave of investing in the meme stocks and young people getting in the markets? Are women a part of that or is that just a bro thing?

SALLIE KRAWCHECK: It’s pretty bro-ey. It doesn’t mean that there aren’t women who are doing it. And we saw some sort of washing and wash out of Ellevest last year because of it. But, look, we were looking at, again, the downloads of the Apple apps, the fintech apps. It’s mostly men who are–

I think women are like, you know I’m busy. You know I’m overcoming the gender pay gap. You know I have a ton more work in the home that I have to do. You know the standards are higher, right? You know with the pandemic I’m having issues which are– women are like, I have so much free time. I’m dying to invest in a meme stock. Women are like, I got– we’re up to here.

ANDY SERWER: Yeah, final question, Sallie. This program is called Influencers. And I’m wondering if you’ve considered how you’re using your influence now and how you might use it in the future.

SALLIE KRAWCHECK: Yeah, thank you for that question. To try to use the experience that I uniquely have as one of just a handful of women who made it to the senior levels of Wall Street and the investing industry in order to improve lives of other women and in particular our daughters and nieces that I am surprised it’s not better at this stage. And recognizing that money is power, recognizing that historically the 8 to 15 minutes it would have taken an individual to open an account at a place like Ellevest was probably the best return of 8 to 15 minutes they could spend because of getting their money to go to work for them.

And so this is easily the most important thing I’ve done in my career. And when young women stop me on the street, they see an Ellevest bag and thank me. The whole thing is just– it just is– is just so worth it.

ANDY SERWER: Sallie Krawcheck CEO of Ellevest, thanks so much for your time.

SALLIE KRAWCHECK: Thank you.

ANDY SERWER: You’ve been watching Influencers. I’m Andy Serwer. We’ll see you next time.



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