Once known as the most powerful woman on Wall Street, Sallie Krawcheck led Merrill Lynch, Smith Barney and Citi Private as CEO. In 2016, she started Ellevest, a digital investment firm aimed at helping women create wealth for themselves, reshaping an industry that was created ‘by men, for men’. Here's her story.
On growing up:
I grew up in Charleston in South Carolina, did a degree in journalism, then moved to New York, partly because my father told me not to – he thought it was too dangerous. I did an MBA at Columbia Business School then spent my 20s as an investment banker, my 30s as a research analyst and my 40s heading up Smith Barney, then Citi and Merrill Lynch's global wealth management divisions.
The industry claimed to be a meritocracy. If 90% of fund managers, 95% of hedge fund managers and 86% of financial advisors happened to be white males, well that’s just because cream rises to the top. I never gave much thought to the staggering gender disparity until the 2008 financial crisis hit. Then I realised that Wall Street wasn’t a meritocracy at all, it was a mantocracy.
On getting fired:
I hold a world record. I’m the only woman who’s been fired on the front cover of The Wall Street Journal… twice. At Citi, I clashed with the CEO. We’d missold products and I said, ‘Instead of waiting to get sued, how about we admit we did the wrong thing and reimburse some of the losses?’ I was literally told to sit down and shut up. It went to the board and they sided with me. But here’s a piece of advice: if you take on the CEO, you’ll get fired. It might not happen immediately but, believe me, it will happen.
On starting her own business:
After leaving Merrill, I thought, ‘Gee, maybe I should take it easy, join a couple of boards and hang out at the beach.’ But one day – literally while I was putting my mascara on – it hit me that the retirement savings crisis is a woman’s crisis. Women retire with two-thirds the savings of men, live six to eight years longer and have higher medical costs. Plus, 80% of women are single in their final years.
There are a ton of people working on the gender pay gap but no-one had spent any time on the gender investing gap. Simply put, women don’t invest as much as men do. And they don’t invest as early as men do, either. Of all the assets women control – both inside and outside their portfolios – they keep a full 71% in cash whereas men hold 60%.
The cost of that investing gap over the course of a woman’s life could amount to more than $1m. That’s a change-your-life amount of money. It could give your business a few more years. It could allow you to quit your corporate job. It could get you out of that relationship that no longer works.
After spending hundreds of hours with women to better understand their investment goals, I started digital investment platform Ellevest in 2016. Now I spend every waking hour trying to get women more money. We will never be fully equal with men until we are financially equal with men.
On why money talks:
We’re told we’re not as good at maths. We told we’re not as good at investing (Not true: studies have found that female investors outperform men by nearly one percentage point a year). Magazines give us ‘16 ways to have smokey eyes’ but there’s next to nothing on money. We need to talk to women about investing in a way that’s consumable. This isn’t about trying to dumb it down; the problem is that the industry complexes it up.
Women are a huge opportunity. We control $5tn of investable assets, we direct 80% of consumer spending and we’re more than half the workforce. And yet somehow we all got convinced we need to be empowered. That is power. As my friend Cindy Gallop [CEO of MakeLoveNotPorn] says: ‘There’s a lot of money to be made when you take women seriously.’
On going against the grain:
So many of the great decisions in life are anti-consensus. If you do the same thing as everyone else, your chances of doing it better than everyone are pretty low. If you want your business to be successful, you almost need people to tell you you’re nuts.
When we launched Ellevest, one of my friends (I thought she was my friend) wrote an article saying it would fail. It was so painful to read but I knew I was onto something. I base my decisions on a mix of gut instinct, feedback from a group of diverse advisors from different points in my career, and numbers. That seems to be working. Ellevest was the fastest digital financial adviser to meet $100m of assets under management. And we’re now well past $140m.
On the gender pay gap:
People have said to me: ‘You should be focussing on the gender pay gap, not the gender investing gap.’ That’s so stupid. It’s like saying ‘I broke my leg and my arm – but until I get my leg fixed I won’t pay any attention to my arm.’ Frankly, we need to tackle all of it.
Sallie Krawcheck was a guest speaker at the Dell Women's Entrepreneur Network (DWEN) Summit in Toronto this month.