Ellevest CEO Sallie Krawcheck Tackles The Gender Investment Gap
Women in the U.S. face many financial challenges beyond the gender wage gap, including saving enough for retirement.
In a View From The Top conversation, Here & Now‘s Peter O’Dowd speaks with Ellevest CEO Sallie Krawcheck about how the company’s newly launched platform aims to help women better invest for their future.
Interview Highlights: Sallie Krawcheck
On the gender investment gap
“We’re facing a retirement savings crisis in this country, and if you actually dig through the numbers, it is, in large part, a women’s crisis. That’s because we women live longer than you men do… We retire with less money than men do, and that’s in part because we have, as you just indicated, something that we really haven’t been talking about, which is a gender investing gap. Men invest to a greater degree than women do, and it costs us women thousands, some cases hundreds of thousands, for some women millions of dollars over the course of their lives. It’s a big deal.”
On female investors and why the gender investment gap exists
“The research indicates that when we women invest, we women do tend to be more patient, take a longer-term perspective and as a result of it, tend to be better investors than men. But the messages we get are that investing is sort of ‘the guys world.’ Think about it for a second, if you think about the investment firms and Wall Street, the messages tend to be male messages: outperform the market, beat the market, pick the winners. The TV shows around investing tend to be sports-like in nature. Heck, the symbol of the industry is actually a bull. So there’s some very male messages.
On top of that, we as women tend to buy into some of the old myths – it’s really one of the last places where we are more 1958 than 2016. They are: ‘guys are better at math.’ Not true. People do tend to think men are better investors. Again we talked about it, not true. That women need more financial education to invest. Well, everybody does, but men invest anyways. Women need more handholding, women need a personal relationship, there are all these sort of soft biases that keep us back from investing. The truth is the industry simply hasn’t spoken to us as fully as it has to men, and it costs us.”
On the importance of being financially strong
“If you are financially strong, things can happen to you in life and you can weather that much better than if you’re not. I’ll give your listeners a statistic that they should take very seriously, which is 90 percent of women manage their money on their own at some point in their lives. And the tragedy is when a woman is trying to figure it out for the first time because her husband cheated, or he died. Leaving it in someone else’s hands, something that is this important, when, by the way again, the research shows the women outperform the guys on investing, allowing this to be outsourced is an enormous mistake.”
On the connection between gender, the investment gap and retirement savings
“If there’s not enough retirement savings out there, and if we live six to eight years longer than men, you think about it, every nursing home in this country is 80 to 85 percent female, so by looking at the issue this way, by shifting the lens on it, it’s very interesting because all the solutions we think about for the retirement savings crisis, which is entitlement cuts, tax increase, become more about closing the gender pay gay, keeping women in the workforce longer, closing the gender investment gap.
Closing the gender pay gap in and of itself, because it would lead to more social security contributions, more 401k contributions, by some estimates closes the retirement savings gap by a third. So these numbers are not small. Remember, women are half, plus, the workforce. So getting more resources into the hands of women leads to closing this gap and economic growth. It’s all good.”
On lessons she learned teaching herself to invest
“I found that I bought stocks well, and then would fall in love with them and forget to sell them. And so, I became convinced that the right way to invest is, forget about picking the stocks. The research is awfully clear, that this is a lot of activity for a lot of under performance, in general. Even for professionals. That the right way to invest is to have a diversified portfolio across a range of assets that will lower the volatility and give you market-like returns in theory, over time. And that’s the way we invest at Ellevest, keep it very simple, and rather than talk to the women about, ‘Hey want a large-cap mutual fund.’ ‘No.’ ‘Want a small cap ETF?’ ‘Oh what’s that?’
Instead, we talk to her about the things she can control, which is, ‘How does she want to retire, does she want to buy a home, does she want to have a kid, does she want to start a business? What does she want to achieve in life?’ We then through the use of a very powerful algorithm, then project out for her her ability to achieve those things by investing in highly customized investment portfolios to get her there.”
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