Speaker 1: From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're inside the ICE House. Our podcast from Intercontinental Exchange on markets, leadership, and vision and global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world. And now welcome Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King: The gender pay gap has been an ongoing issue for decades, and all the way back in 1963, the Equal Pay Act was signed into law too, I'm going to quote it here, "Prohibit discrimination on account of sex in the payment of wages by employers engaged in commerce or in the production of goods for commerce." So Congress said about 60 years ago. And while progress has been made, there's still far a ways to go. According to the most recent US census taken three years ago, in 2020, women made 83 cents for every dollar earned by men. And perhaps there's no greater reminder of this than in the world of sports. Across golf, tennis, basketball, you name it, the debate over the gender pay gap continues to make headlines, and this is especially evident in soccer, certainly around the world and here in the United States, where players from the Women's National team filed a complaint with the Equal Employment Opportunity Commission back in 2022, ultimately reaching a $24 million deal with the US Soccer Federation.
And then in January of this year, president Biden signed into law the Cantwell-Capito Equal Pay for Team USA Act into law, ensuring all athletes who represent the United States in global competition like the World Cup, Olympics and Paralympics receive equal pay and benefits regardless of their gender. Now, while the fight to close the gender pay gap continues, whether it be in the spotlight or in the shadows, our guest today is looking at the larger issue, the gender wealth gap. Sallie Krawcheck, a legend of Wall Street, is the CEO and co-founder of Ellevest, a startup digital investment and wealth management platform designed for women by women. An article published by Ellevest last spring highlighted this key difference, women own and not just make less money than men. The pay gap and investing gap are two factors among many that contribute to the wealth gap.
Through her startup, Ellevest, Sallie is using investing as a tool to help close the gender wealth gap. Sallie says, I'm going to quote her here, "The research has always shown that women are better investors than men." But the issue isn't that not enough women are investing. In a moment, we're going to sit down with Sallie to learn more about Ellevest's mission to increase women's wealth through the power of investing. Our conversation with Sallie Krawcheck on how she went from navigating Wall Street to leading it and how she's working to close the gender wealth gap. It's all coming up right after this.
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Josh King: Our guest today, Sallie Krawcheck, is the CEO and co-founder of Ellevest on a mission to get more money in the hands of women. Prior to Ellevest, Sallie spent two decades on Wall Street, beginning her career as an investment banker at Salomon Brothers and a research analyst at Sanford C. Bernstein to working her way all the way up in the C-suite. She served as CEO of Sanford C. Bernstein, Smith Barney's Citi Wealth Management, and Merrill Lynch Wealth Management. She also served as the CFO of Citi. Welcome, Sallie, inside the ICE House.
Sallie Krawchec...: Thanks for having me. Good to be here.
Josh King: I should tell our listeners that a couple of months ago, Sallie was our guest at Whiskey Wednesday on Wall Street in our vaunted 1792 restaurant at the NYSE's Big Board Club, sitting in conversation with my friend CNBC's Scott Wapner. Sallie, it went unsaid in the room, but that was once a bastion of male dominated bonhomie in the old days of the exchange, what did it feel like sitting in front of the room, taking a much more gender balanced audience that night?
Sallie Krawchec...: We women want to have bonhomie too. We want the same. It was good to be there, and it certainly still has those overtones of masculinity with the dark wood and the heavy furniture, and really the weight of history that's there. And there were a lot of great women who forged the way, Mickey Siebert. I remember watching her story about being the first woman on the floor of the New York Exchange. I was, as it turned out, Josh, traveling one night and was alone in a hotel room and actually found myself crying because of the great work that she did to forge a path for the rest of us.
Josh King: In the wings of the room stood Lynn Martin, the second female president of the NYSE, who followed Stacey Cunningham, who served from 2018 to 2021. And upstairs is the office of Sharon Bowen, the first female chair of the exchange. Before we get into Ellevest, your report card, I think, on where women stand overall in the ranks of Wall Street.
Sallie Krawchec...: We're still at a gentleman's C... Or gentlewoman's C-, I think. The fact that we can name some names is good. I want it when we can't name those names, there's so many of them we can't remember. If you tried to name the names of the men, we'd be going on for hours and hours and you couldn't remember them. So I think we've had some visible ones, Jane Fraser running Citigroup, where I used to work, is another notable one. But you look around and there are many financial services companies, Wall Street companies, investing companies where it's still onesie-twosies, and those onesie-twosies tend to be individuals who do not have P&L responsibility but are responsible for more of the support functions. So yes, there's been progress, we are nearly where we need to be.
Josh King: I mentioned the gender wealth gap in the introduction, which is what you've devoted Ellevest to solve. What's the current state of the gender wealth divide?
Sallie Krawchec...: It's going in the wrong direction, at least the gender pay gap, you can say it's been stable at that 83 cents to a white man's dollar. The gender wealth gap, which is, call it 30 cents to a white man's dollar, a penny for black women, a penny for brown women, has actually been going backwards. And part of that comes down to the stability of the pay gap, but the fact that the investing gap has not been improving. We don't need to go to business school 101, but the terrific thing about investing is it compounds. And so if you invest, you earn perhaps a little bit in the first year, but then a little bit more and a little bit more as money earns money on money, and you earn money not on the original investment, but on the return.
And that increasing trajectory of investing is what's driving, in part, an increase in the wealth gap. So women and people of color are falling farther behind. And I would loop it back a bit to the lack of still true, fair diversity in the industry. If you're not bringing underrepresented groups into the business of investing, whether it's investing in the stock market, but it can also be venture capital investing, then it's hard to really serve the underrepresented groups of customers and clients very well. Venture, for example, women make up a small share of venture partners and women startup CEOs get just 2% of venture funding. So those things are completely interrelated.
Josh King: Money earns money on money. New York Magazine recently ran an interview with you under the headline, "How Ellevest's CEO, Sallie Krawcheck, gets it done." Now, it read like one of those glossy profiles of old when actual paper magazines filled newsstands of New York City, are you comfortable being in the spotlight again? Is it part of the mission? It wasn't always the most comfortable place for you?
Sallie Krawchec...: I couldn't avoid it to some degree, for a period of time being the first woman to run a Smith Barney or to run a Merrill Lynch, being the only woman in the C-suite, in some cases I couldn't hide, if I wanted to hide. It was really a double-edged sword because the visibility could help attract talent, for example, attract capital. But of course, once you're out there, it's easy to take pot shots at people. But for women in my generation and even this generation of women CEOs, it can be hard to hide honestly.
Josh King: Talking about being the only... Before we're going to dive into the work you're doing now at Ellevest, I really want to go back to those beginnings in Charleston, South Carolina. You've described your middle school self as half Jewish, half waspy. What influence did your childhood in the south and your parents have on you?
Sallie Krawchec...: It's foundational. It's absolutely foundational. And part of it, I'm going to be honest with you, was the typical rebelling against my mom. My mom, as is very typical of women of her generation, was a work only in the household mom, with four kids, age difference, oldest to youngest, three years and 11 months, no twins, is mathematically possible. But that poor woman was buried under piles of laundry and housework and could have, and I think watching her growing up, wanted to do so much, not more because she did so much, but different and tried a few times to get into the workforce and was not able to make the transition. So that was number one. I didn't want to be my mom, I'm just going to be honest.
Number two, we didn't have any money and my parents fought cat and dog over money, it was the only thing they fought about. It was the thing that would send my father storming out of the house. It was a very scary thing and it was always about scarcity. And so that combination of I want to rebel against what came before and I want money. I'm just going to be honest, I just want money, I want to have security, I want to have the confidence, I want to have the independence of money, is really what drove me to Wall Street.
Let me see if I can, coming from Charleston, South Carolina, not knowing a soul in the industry, not knowing one single... In fact, I got a funny story for you. When I was interviewing, coming out of college, fortunate enough to get offers from Salomon Brothers, Goldman Sachs, JP Morgan, Morgan Stanley, at the time. And I remember calling my father who's a lawyer down there and saying, "Daddy, what do you think?" And he's like, "It's really good. It's some really good firms." He said, "I don't really... Morgan Stanley versus Salomon, I don't know, but do not go to Goldman." And I said, "Okay, why?" You're going to love this. He said, "Because I've never heard of them before."
Josh King: How was it to adjust your thinking to, if you were going to head up to Wall Street with parents who might not even know that Goldman Sachs existed changing your outlook, was that a product of your education at University of North Carolina?
Sallie Krawchec...: Yeah, going to Chapel Hill was life-changing for me. And I can't imagine this will resonate with your listeners, but at the time, I think, when I went up to interview for the scholarship that I got, I think it was my first time on a plane, maybe my second time on an airplane. And really a sense of I'm going north because so many of the kids in my high school stayed in the hometown, or certainly in the home state. And it was a scary thing at the age of 18 to go someplace where I'm not going to say I knew nobody, I knew one person and he was coming into the school at the same time that I was. Getting to this place of thousands and thousands of individuals and I don't know anybody. And it really gave me the confidence of, if I can do this, I can try to continue on and go to New York and go on to Wall Street.
But boy, when I got to Wall Street, what a culture shock. My first day, maybe second day, of work, I show up wearing what then was the late 1980s height of Charleston fashion, which was pretty much a prairie dress, but certainly a skirt to the floor, and a little floppy bow, and the shapeless jacket. And I am standing at Salomon Brothers 1987 at my desk figuring out... I don't think there was even a computer there, but here are my pens and here's my HP 12C and this is my phone. And looking the whole thing, and you smell cigar smoke, and you feel the electricity in the air change.
And this corpulent individual, bald fellow, walks by smoking a cigar, and he looks me up and down and he says, "What kind of (beep) maternity wear is that?" And I'm like, "Who is that rude individual?" And of course the answer was, he was my boss's boss's boss. The story goes that the first chapter of Bonfire of the Vanities when Sherman McCoy left home and walked the dog and meant to call the girlfriend, but accidentally called the wife, that that was based on him and on his character. So this was a legendary, and legendarily unpleasant individual. And I remember just like, "What have I got myself into?"
Josh King: You mentioned Bonfire of the Vanities, another bestseller that came out maybe two years later was Michael Lewis' Liar's Poker, based on the very shop that you were in. You say that what you showed up in day one at Salomon Brothers, it's actually Salomon Brothers, it's literally the beginning maybe of bro culture. How did you try to fit in or not fit in?
Sallie Krawchec...: And by the way, I did play Liar's Poker once, as it turned out, in that same, I would say gentleman, but he wasn't so, guy's office, man's office, I just kept my head down. There was no, at the time, microaggressions or unconscious bias. Those things obviously exist, but there weren't words for them, because the bias was so overarching and clear and obnoxious. It was a battle almost every day. And when you looked up, when I started, there were very few women who were senior to me. And literally by the time I was 26, and I was at that point in the London office of Salomon Brothers, I was the senior woman in investment banking, at 26. I kept my head down. I had no choice. It wasn't, "This doesn't work. I got to find another job." I had parents who did not have wealth built and I had an apartment that I had to pay for 750 bucks a month, whether I had a job or not. And so there was no option for me of, "This is uncomfortable, I need to leave." It was, "I have to see this through."
Josh King: In some part of that arc, on early years on Wall Street, you did make the decision to migrate north, up to Morningside Heights, to get your MBA from Columbia. What made you, at the time, want to make the switch to marketing from finance? Were you trying to think that maybe this wasn't right for you?
Sallie Krawchec...: Definitely wasn't right for me. And so I went to business school to try to move into marketing, and the problem was I wasn't a stellar marketer at the time and there weren't any jobs. I went through a couple of years of business school with a view of let me get into a different area and let me try to get into media and was not able to make the transition. So I ended up leaving Columbia Business School and going right back into investment banking where I spent six minutes, maybe seven at Donaldson, Lufkin & Jenrette.
Josh King: Then you pivoted to become a research analyst covering financial institutions at Sanford Bernstein. In one podcast you mentioned that as a young analyst, you were the most senior woman banker at the company in all of New York City, and you've been talking about that in our conversation so far. What pressure did that put on your shoulders, do you think?
Sallie Krawchec...: I try not to think about it too much. The move to research was a great move for me. No, there weren't as many women around, but I actually found the path to success to be a lot more clear to me, and probably counterintuitively because we're all about teams and teamwork, and the dynamics of teams. At that point in my career, I didn't want to be on a team, I just wanted to do my research, find the insights other people weren't finding about companies, help clients make money, write them up, engage with smart people, just let me do my work. And I could never fight my way through the thicket of being on the right team at Salomon or being on the right team at DLJ. But if you said, "This is your area," and I started off covering life insurance and then moved serendipitously to covering Wall Street, I could out-research, and outwork, and out-write and out-call clients and out-hustle anybody there.
I was always smart enough, but I could outwork anybody. And the key that I found to my success, possibly counterintuitively, it goes back, Josh, to the question about my standing out. The key was I got to stand out. As the only woman, I'm already going to be standing out, I might as well lean into that. And what I meant by that is, I chose to take a path as a research analyst, and really in my career after that, of I didn't say anything unless I had something to say. And I only had something to say if I had something different to say. For me to write up, "JP Morgan reported their earnings today. They were a penny better than expected. Half of that was currency and the other..." Who cares, right? Instead, I had a mantra, which I think was really important, which is big calls on big stocks, big calls on big stocks. And if they're off by a penny, who cares?
But if it is in my first piece of research, was on a company that I said, "Their credit quality is deteriorating fast. Nobody sees it. Here are the reasons why. Here's the analysis to get through the noise and see the deterioration. Their growth is illusory and is going to implode." That was a big call and it was on a multi-billion dollar stock and I ended up being right. And when you lean into that difference, as a research analyst, and yeah, it helps a lot to be right, but it's okay to be wrong every once in a while too. It's okay to make people think. By doing that, I became... If you were investing in the stocks that I covered, I was indispensable. I had to make myself so if you were going to invest in a stock I covered and you didn't talk to me, you were making a mistake. And that your boss was going to be like, "How come you're not talking to the gal who's way off a consensus?" And by doing that, I was able to very quickly become successful as a research analyst.
Josh King: So if you're working to out research, outwork, out-write, out-hustle at Bernstein, and then you rise to director of research, and then CEO, and you're making these big calls on big stocks, so much of that, Sallie, in an era where TV is just beginning to rise, and you are maybe making some awareness of what you're doing by your presence on some of these calls, but most of it is how you're sitting in front of a screen and writing. Just going back to the time at UNC, or Columbia, or even in your childhood, I read one interview with you where you talk about your nighttime routine now, which is to read fiction and nonfiction. How did you develop as a writer to figure out the most impactful words that were going to make the big calls and get people to pay more attention to you than someone who's maybe writing with a more dry style?
Sallie Krawchec...: I was a journalism major at Chapel Hill, that's what you need to know. How do you grab somebody with a headline? The headline, that first piece of research that we were talking about, was name of the company, colon, Whoa Nelly. Nobody was writing Whoa Nelly at the time, but if you read that, you say, "I'm curious, who is this Nelly? Why does she need to slow down." And capturing the essence of it. Bernstein, when we did the famous black books, the research black books, capturing the essence in less than a page at the beginning, everything you need to know, the rest of the hundred pages was the in-depth analysis. But I love to joke that being a journalism major meant that I showed up on Wall Street able to type 120 words a minute, whereas other folks were hunting and pecking, particularly at the time.
Because computers were just making their way onto everybody's desks. And so the time I saved, I'm joking, but I'm sort of not joking, by being able to type and the success I had by being able to capture attention. And again, it was just building on the fact that I already stood out. I love to joke that if you were my competitor, you were a fellow, a gentleman, and people are like, "That guy's work is good. What's his name?" "I don't know. Describe him." "Well, he's a man and he's got brown hair, and he wears glasses, and he wears red." You're not doing it for me, that's everybody. But the woman with the slightly polish sounding name, you couldn't forget me, and if I then had the zippy research, it made it a must read.
Josh King: In 2002, Fortune features you on the cover of its magazine under the headline, "In Search of the Last Honest Analyst." And for people whose memories don't span back easily 21 years, tell us how you earned this reputation with this controversial decision that you made.
Sallie Krawchec...: Big calls on big stocks. I took that mantra to running business as well. I was promoted to director of research at Sanford Bernstein at a young age, pretty much because no one else wanted the job. That's not exactly true, but it's really close. So I was not the first choice, I was not the second choice, I don't think I was the fifth choice, but I was there when it was my turn and said, "Yeah, I'll become director of research." The big call was at the time, Wall Street research analysts were expected to not only do their research, giving advice to institutional and individual investors, telling them you want to buy low, you want to sell high, they were also part-time investment bankers, and they were brought in on investment banking deals. And so they were advising also corporations who of course want to sell, issue their stock high and buy it low.
So one group wants to go zig and the other group wants to zag, who is your client? And we were doing underwritings at Bernstein at the time, I actually was involved in the Goldman underwriting, and I noticed that as we were able to make more money from it, weirdly, the more bullish I became. So when I became director of research, I said, "This is a clear conflict of interest. We should distinguish ourselves by having the most in-depth research, but in particular, we should be the independent research firm."
And so I took us out of the investment banking business and we gave up millions of dollars, millions of dollars in revenue, and our research analyst started to leave because we couldn't afford to pay them as much. The internet bubble burst. Eliot Spitzer comes in and discovers old emails that essentially say, "I'm recommending the stock to individual investors, but it's a POS. I don't believe it, et cetera, et cetera." And the big Wall Street firms all ended up paying, I think a couple of hundred million each in fines, which was a lot of money at the time. We stood alone as the independent research firm, our business went vertical, and I ended up on the cover of Fortune Magazine. In other words, a big call on a big stock.
Josh King: So then Sandy Weill calls you to be CEO of Smith Barney to help repair the company's reputation amid all of its scandals. Discussing this role, you've given the career advice at one point or another that if you have a stretch assignment, just take it. Walk us through what this stretch assignment was.
Sallie Krawchec...: In an unlikely turn of events, after being on the cover of Fortune, I knew Sandy because I had cover Travelers as a stock, and was really tough on them. In fact, when Travelers bought Salomon, I was very downbeat on the stock. I wrote a very negative research report, and I remember Sandy called me up and screamed at me over it. P.S., I was right, he was wrong. He has told me I was right, he was wrong, but he respected the intellectual honesty and the rigor of the analysis, and the fact that we had put in place a strategy that served us well. When Travelers had to pay out those couple of hundred million. Their stock was going down pretty much every day because of it, Sandy was in Eliot Spitzer sides, and he called me one day. I remember sitting in my office and a friend of mine from London was visiting, and it was one of these Sandy Weill's on the phone.
Good joke. But it was in fact him. And he said, "I'd like you to come and turn around the Citigroup research business." And I said, "I've got the best research business on the planet. I don't know why I make the move." And he said, "Well, what if you run Smith Barney too?" I'm like, "No. Hold on a second." For those of your listeners who don't know, Smith Barney was a Merrill Lynch type business, number two to Merrill at the time, but it's now part of Morgan Stanley, but it was an old storied Wall Street business.
And so of course I took the job and went from running that 386 people on a Wednesday to, I can't remember if it was 35 or 40,000 on a Thursday. It was a hell of a bet he made. A hell of a bet. And the other memory is being with a friend of mine the weekend after he called and saying, "I don't know. Should I do it?" And she said, "No, you should not do it." Like, "What?" And she's like, "You could fail and you could fail publicly". And I thought, "So my upside is I get to turn around an American institution, I get to learn a lot, I get to work with super smart people, I get to really engage. The downside is public failure and humiliation. That seems like a fair trade to me. I'm going to do it." But I do remember that, "No, don't do it because you might fail."
Josh King: I'm talking about failures, you served as CFO of Citi for two years and then CEO of Citi Wealth Management for two years really until the start of the financial crisis. You've been open about this period. You say, "I was invited to leave because I had a fundamentally different business perspective than the powers that be." Tell us about that time and why you felt it was important to reimburse clients. Seems like you really continued to uphold this reputation that you started back at Bernstein.
Sallie Krawchec...: Yeah, it cost me a lot. It really did. It cost me a job that I love. It cost me financially, it was a lot of heartache. But to wind back time, I'm running Smith Barney, I'm running the Citi Private Bank. We're in the '07-'08 period, I think it's early '08. And I had a group mulling around outside of my office trying to catch me in between meetings. I said, "Come on folks, what's going on?" And it was a, "Houston, we have a problem moment." They had discovered that there were products that were sold to our clients that were supposed to be low risk, that were advertised as low risk, that were actually high risk, that were supposed to go down 8 cents on the dollar in a bad market, went down a hundred cents in a bad market.
And I went to my new CEO who had been brought in to turn the company around because of the financial crisis and said, "Look, I think we're at fault. I don't think there was any evil intent. I think this was a mistake. I think we should partially reimburse these clients. I know the small print says you could lose everything, but the big print says low risk." What was really interesting is he was at the same time reimbursing institutional clients who had tried to put products back to the company, weren't able to sell them in the market, and were standing up and making a market and using immediate dollars for doing it. So reimbursing institutional clients, but would not do it for the individual investors, which just did not sit right with me. So I kept going back, making the argument, he kept sending emissaries to me to tell me to sit down and shut up. The board discovered the back and forth, in part because some of them were investors in this said product. And we went to the board, and the day of it, I knew I've lost my job.
It doesn't matter how this comes out. If you take on your boss at the board, it doesn't matter if the board sides with you or not, he's not going to want you there. And so at a time that they were exiting other executives investing the stock, after a period of time, they exited me and told me I got nothing. And it was a sad time in my life because I did it with eyes open. I knew exactly what I was doing, but I really loved the job and loved the company at the time, loved the comradery of the individuals who were working there. I just got crosswise with the boss, which happens.
Josh King: Then you end up joining Merrill Lynch Wealth Management as its CEO in 2009, really in the middle of the financial crisis, just as Merrill has been bought by B of A. I want to listen to just a clip from a Wall Street Journal video on the B of a Merrill Lynch merger back in 2009, a couple of months prior to your start. Let's listen
Dennis Berman: The deal from hell. I'm Dennis Berman of the Wall Street Journal. My colleague Heidi Moore here to talk about Merrill B of A deal that seems to be disintegrating by the day, the news just came out that John Thain is leaving Bank of America, where does that leave Merrill Lynch and where does this leave this deal?
Heidi Moore: Exactly. I think it has set a land speed record for merger integration disaster in the past 22 days, the deal closed only 22 days ago. And since then, the bank has had to take $118 billion from the treasury, another 20 billion of direct cash injection from the Treasury. It's seen the president leave, it's seen the CEO leave, it's seen the head of wealth management leave. And basically the challenge for Bank of America right now is going to be to stem the disaster, basically find a way to stop the bloodletting.
Josh King: Find a way to stop the bloodletting. What were some of the biggest challenges you faced when you joined?
Sallie Krawchec...: That was me. That was me. They brought me in to stem the bloodletting. When I got there, the financial advisor attrition rate was in excess of 50%. Over the course of a year, 55% of the advisors would've left if that had continued. When I got there, we turned that around immediately and started to net grow the number of advisors. And by two years after that, the attrition rate was 5%, which counts advisor death in it. And so it was impossible to get to zero, I guess, unless you prop people up in their desks. So I feel and felt very proud of that. I think I put in a terrific team and put Merrill on the right track. Now, no good deeded goes unpunished. Ken Lewis, who had brought me in, had committed to me that he would stay at Bank of America for two years in part to make a good transition for me.
And he was gone within two months. He never said it, but I think the regulators pushed him out. I had a new boss. I offered to that new boss to step down since I wasn't his choice. And he said, "Nope." And so I stayed and after two years, he called me in and essentially I got a, "Thanks for the turnaround. I'm now going to put in one of my inner circle." Who happened to be a gentleman who was further along in his career who had never run a wealth management business before.
That was tough. The first one was tough, this one was also tough. I've had any number of individuals say to me, they push you on the glass cliff. The glass cliff is where women or other underrepresented groups are brought in times of crisis. And then when things stabilize, it goes back to the norm of being run by people who are part of the majority. But it's interesting to hear that audio that you played, which I don't ever remember hearing, it does bring back what a (beep) show it was. How proud I am of the team that I put in that we've got it on course
Josh King: Well from one (beep) show to another, as we head toward our mid-show break, if we were to fast-forward 14 years, here we are in the spring of 2023, I want to get your thoughts on the banking crisis that we've had this year, and start by listening to a bit of an interview that you did with Barron's in April.
Sallie Krawchec...: The one thing I will say, and it's really worth underscoring, is the regulators are experienced and they're acting fast and they're acting decisively. And I don't know if you remember, but back in '07, '08 when we were looking into this abyss, and I don't think there've been many... Nothing in business has been as scary as that to me, having a front row seat being at one of the big banks, but the regulators moved slowly. This time, and we saw it also during the pandemic, when the markets were shaky, they moved quickly and decisively. And that's a real step up.
Josh King: So we've lost Silicon Valley Bank, First Republic, a couple others. Overall, how do you think we've netted out this time?
Sallie Krawchec...: The weekend of Silicon Valley Bank was not my scariest weekend ever, because that was during the financial crisis, but it was in the top five for sure. And by the way, I'm beginning to think it's me, because the internet bubble burst, this scandal in the bubble, there was research at the time and I was on the right side of that, but that was the last honest analyst. And then the epicenter of the subprime crisis, of course, was the big banks, and I was at Citigroup, and running Smith Barney. And this one with Silicon Valley Bank, the epicenter of the crisis was a startup, and I'm running a startup. And I'm beginning to think it's me, beginning to... I don't even want to know what I do next, but kudos to the regulators because they moved quickly. And of course, something could happen tomorrow, but I think they moved quickly and decisively in a way that could have been an extinction event for so many startups and innovative companies.
Josh King: Talking about what you're doing next, after the break, Sallie Krawcheck, CEO and co-founder of Ellevest, and I are going to talk about her transition from corporate banking to elevating women as investors through her startup Ellevest. That's all coming up right after this.
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Josh King: Welcome back. Before the break, I was talking to Sallie Krawcheck, CEO and co-founder of Ellevest, about her career in corporate banking at the highest level of the C-Suite and Wall Street's financial institutions really during the most volatile times on Wall Street. In 2013, you acquired 85 Broads, it's a backhanded reference to the old Goldman Sachs headquarters. This was in fact a professional women's network that you later rebranded as Ellevate. And then a year later you co-founded Ellevest, the startup digital investment and wealth management platform designed for women. Can you give us a brief overview of what inspired you to get involved in closing the gender wealth gap?
Sallie Krawchec...: You can see both of them. Ellevate Network, focused on helping women advance through networking. Networking is the number one unwritten rule of success in business. Women tend to recognize this later than men do, tend to network less, network later. And so that was one means of, how can we advance women? I'm no longer involved with that company. Ellevest is really focused on closing the gender wealth gap by closing the gender investing gap. And with Ellevest, the hypothesis was, we know women don't invest as much as men do, the investment industry explanation for it, and you hear this all the time, is, women are risk averse.
It's just stated like an absolute fact. Women are risk averse. What? Yeah, they don't invest as much. Except we said, "Let's question that for a moment." Maybe that is true or maybe in an industry that skews so male, where 90+% of traders are male, and 98% of mutual fund dollars are managed by men, and 99% of investment dollars are managed at companies owned by men, and 86% of financial advisors are men, maybe it's not that women are risk averse, maybe men built a business for men.
Didn't mean to, I'm not saying they meant to, but maybe the trading aspect to it, maybe the jargon aspect to it, maybe the Bitcoin, maybe all of that stuff is more appealing to men. Maybe not, but maybe. And what if we were the one investing firm, FinTech firm, wealth management firm, that is built, centered on women. Then why don't we take a couple of years, not rushes, but a couple of years, and go deep on the research of what are the gender differences and build, as we have, the only investing algorithm that takes gender into account? Which matters if you're a woman because you earn less, your salary peaks sooner, you take more career breaks and you die later. Really important. As well as other things like women, jargon stops us cold and then we leave the experience, whereas men move on through it.
I don't quite know what this means, but I think it means... It sounds like in context, it means that women know... I got to go figure that out. That's how we're socialized. Ellevest was founded with a mission to get more money in the hands of women, to do that through investing and now, of course, financial planning. To do it from a woman's first dollar through to multiple millions of dollars, and to do it often by investing in other women, where the research has shown the returns can be superior. It's really my life's work, honestly.
Josh King: If you go back to 2009, there's a profile of you and the New Yorker under the headline, "The woman who made it on Wall Street." And in the piece it said, "Krawcheck rarely talks about her gender, which would build barriers with male colleagues, but often discusses the challenge of raising a family, which men can thoroughly relate to." How do you think you've evolved from rarely talking about your gender to becoming a leading voice for women?
Sallie Krawchec...: I was going to say that sounds so complimentary and so different from where I am now. I think some of it is age, and you're like, we just stop playing the games. Can we just call a spade a spade? Can we call out these issues? And I think I shifted because the work we're doing is so important. It's so important. We love to say at Ellevest, "Nothing bad happens when women have more money." And we've been going in the wrong direction. And this is true at a macro basis. Look, we're just coming out of the Taylor Swift, Beyonce, Barbie summer, where you're welcome, women kept the economy from going into recession. Women have money, we're more likely to spend it, i.e., injected into the economy. There's research about communities being fairer and stronger when women are more are financially strong, that when women have money, they tend to invest in their families.
Men, not as likely to do so, and so their daughters are better off we all know that, but their sons are better off as well. And so nonprofits are better off, women give away a larger percent of their wealth. The climate, women are more likely to believe in climate change and more likely to donate. All these good things happen when women have more money and it's a micro thing. Today, money is women's number one source of stress, it's eating away at her. And by the way, we all know if she's in a relationship where she doesn't have as much money that keeps her in the relationship, she can't leave, in some cases. She can't leave the job she hates, she can't start the business she wants to, it's just fewer degrees of freedom. And to go all the way on this, there's no domestic abuse without financial abuse.
And so, when I look at this, I say, this is a defining issue of our time. These wealth disparities, true for women, true, of course, with the racial wealth gap, where I believe I can make some progress is with this gender investing gap. That given my background, my privilege, all the experiences I've had, I think this is something I can help solve and certainly raise awareness of. Certainly raise the awareness so that even away from Ellevest, women are saying, "That gender investing, I know of that." The fact that so much of modern media panders to women when it comes to money, or talks about how hard it is, or talks about the scarcity of it. I recognize that. I see that we're being talked down to, I'm going to see my way clear of this. So Ellevest is not only building a business, we're working to change society too.
Josh King: This past January, Sallie, you joined Bloomberg QuickTake where you disclosed how you lost 80% of your net worth. I want to take a quick listen to that.
Sallie Krawchec...: My big money mistake was forgetting a central tenant of investing, which is to diversify, diversify, diversify. I received equity in Citigroup when I worked there at a senior level, and I held onto it rather than selling it and diversifying away from it. And I held it when it went from the low thirties to the mid-fifties, and I held it when it went right on back down into the teens and single digits. The reason I held onto the stock is because I was loyal to the company, and wanted to be seen as loyal to the company, and felt like it was the right thing to do. I lost more than 80% of my net worth.
Josh King: Diversify, diversify, diversify. When did you first start investing for yourself? What did you learn about it? Did anyone in your life stress the importance of investing in diversification?
Sallie Krawchec...: No. I started to invest as a research analyst, but it was very research analysty, so I'd buy a stock that one of the other analysts was recommending, or when I was allowed to a stock that I was recommending. I tended to buy pretty well, and I tended to forget to sell a few different times. I was not a great financial advisor for myself. Then I went to Citi and most of my net worth was in Citi stock. And I began to have a financial advisor, but who quite frankly... I should have diversified, I missed that, but so did he. I think he was a little asleep at the switch at the time and didn't really push me on the issue and say, "Most of your net worth is in Citi stock. And by the way, let's scenario plan what's going to happen if the stock market goes down a lot. Citigroup stock will go down more, your other stocks are going to go down. You could well lose your job. Your husband's in private equity, he could lose his job. Your New York real estate."
There was just no recognition of how intertwined these things were. And look, now I'm a diversified investment portfolio gal. That's what I am, and that's what we provided at Ellevest. You don't have the option to trade crypto at Ellevest, you don't have the option even to trade individual stocks at Ellevest. We are very much about goal-based investing and using the components of ETFs where it makes sense, individual stocks where it makes sense, depending on what one's needs are in order to build the portfolio that gets one where one wants to go. We've had some pressure of, why wouldn't you let me trade stocks? And we say, "You know what? You can do that someplace else. We're here for your serious money."
Josh King: You talked about, earlier in our conversation, the move from overseeing a couple of hundred people to overseeing tens of thousands of people. And now as you're beginning and launching Ellevest, you're back to tens or maybe hundreds of people. What was the transition like from running a corporate bank to running a startup?
Sallie Krawchec...: It's a great question. I spent a lot of time thinking about it and really thinking about what was important to me is important to me, and what is not as important to me. And it's not just you've got X number of people, it's how you spend your day. At these big global banks, these jobs are complex. You're dealing across geographies and countries and business lines, and it's just complicated. There are perks to it, the offices are super nice, the planes are really nice, the cars and drivers are terrific, the pay ain't bad. And is that important to me? Is having that title important to me? The content of the day, managing versus leading versus doing, what did I want to do? And what I came down to is I like doing, I like leading and I like doing, I'm not the top manager on the planet.
I can do it, but I prefer to be either deep in the weeds building something, or leading and leading change. And the bottom line for me was it was all about impact. That I prefer changing women's lives to having a big title or having the perks, but I was kind to myself. I gave myself time to really think through it and try to be non-judgmental. But it's okay, if you're not about impact, that's totally fine. And it's okay to be about the biggest paycheck, but you got to be pretty honest with yourself about it. And I had to do it because not only is it fair to me, I was raising money and have raised money from some really terrific and prominent individuals. And you don't want to be like, "I sort of think I want to do the startup thing."
If Joe Mansueto at Morningstar, who's such a terrific human, has built such a terrific business, is writing your big seed check, or Muhammad Al-Agil is investing, or Bob Druskin is investing, or Karen Finerman is investing, or Andre Young, or Ajay Banga, or Brian Finn, or Melinda Gates, Penny Pritzker. I can go on and on... And Mellody Hobson, what a superstar. These people are on the journey with you and investing in you, you better be absolutely sure this is what you want to do.
Josh King: After you launched Ellevest in 2016, you're now to the point where you're probably holding about $1.8 billion in assets with a community of about 3 million people. And you've attracted names like Mellody Hobson, and Melinda Gates, and Karen Finerman, into those that are putting money into it. Share for our listeners what the process is. How is Ellevest unique in its offerings and how is it specifically tailored for women?
Sallie Krawchec...: I mentioned this a little bit before, we centered women in everything we do. So the investing algorithm takes gender into account, others don't. I mentioned the jargon. We try to really cut down on that because it stops women cold. Risk tolerance, the age-old question, risk tolerance. What we found is that nobody knows what their risk tolerance is, honestly. Men will take an educated guess and continue on. Women will stop and leave and say they're coming back after they figure it out and they don't. That is a really, really important issue to solve. And by the way, we solved it by taking that question out, but by asking her goals, asking her to prioritize her goals, knowing how much she can afford to invest every month and how much she can afford it, and giving her a risk budget. By the way, it doesn't matter.
She says, "I want to take on a lot of risk." But her goal is to buy a home in three years. We can't give her a lot of risk, so we said, "You know what? This is our job, to figure out the right amount of risk." So those were a few things on the digital side. We also today have financial planners who are women, financial advisors who are women. And a lot of folks serve the camp that women don't need to have women engaging with them in order to invest, but that's not what the research shows. The research shows that in non-Ellevest... For all the other firms that aren't Ellevest, something like... I can't remember if it's two thirds or 74%. So let's say split the difference. 70% of women say their financial advisor doesn't understand them and their needs. It's huge. It's huge. It's huge.
Also, when women have women financial advisors, they invest 11% more. That's huge. It's huge. We looked at the research and said, "You know what? People like to see themselves, whether they know it or not, acknowledge it or not, reflected back to themselves." And the final point I would make is investing for impact. I know ESG investing has gotten weirdly controversial, if you believe as we do, and I think we're showing that you do not have to give up financial return to have a positive impact, I think those issues really fall away. We tend to invest with an eye towards investing in women in part because that's who we are. And in part because the research shows that you can earn a fair, if not superior return from doing so. And so through our business, whether it's impact ETFs, the early stages, or with our financial advisors investing in privates that are getting money to women entrepreneurs that are getting money to women small business owners. [inaudible 00:52:45].
Josh King: What are some of the interesting privates or women entrepreneurs that you've found that have been particularly rewarding to get the money into their hands?
Sallie Krawchec...: FemTech investments right now. Where women's health gets something like 2% of venture dollars, but there is such tremendous need. We have one investment that is investing in technology in developed markets, but is part and parcel of the investment requires the entrepreneurs to take the technology to sub-Saharan Africa. How great is that? Another one that is investing close to my heart in workforce housing in the Carolinas, fixing it up in an environmental sustainable way and renting to women who are victims of domestic abuse and are in transition. That's what I want to invest in. Those types of investments, uniquely are available at Ellevest. It's not something you find at the big wirehouses, and it's not something you find at RIAs. I just think it's so rewarding.
Josh King: And that's not just a South Carolina issue, the workforce housing issue is huge everywhere. And if that can be successfully solved, that would change really the dynamics of a lot of American communities.
Sallie Krawchec...: For sure. For sure.
Josh King: This past July, Ellevest published an update to its women's financial health index, and you've touched on how things like inflation and working from home have impacted women financially. How do you conduct this research and what are some of the key findings that come out of it?
Sallie Krawchec...: It's the research analyst in me turned to the team and said, "What is the financial state of women? And where is that number?" And the answer is, there isn't a number. And I said, "I think we can do something to solve that." And so we pulled together an index from both publicly available numbers of things that affect women disproportionately, like inflation, affects all of us, affects women more, affects women of color even more because we have less in the way of financial resources. But things like the percent of women who've got mandated paid parental leave. Our representation in DC, issues around reproductive rights and legislation that is restricting reproductive rights for us. So a range of different metrics, some of which are Ellevest specific. How are women investing? How are women impact investing? Are they continuing to invest into even tough markets?
P.S., the answer is yes, we've gotten through this most recent volatility with a real string of recurring weeks in which deposits have come in while the industry has been in net outflows. We said, "Let's boil this down to a number." Women moving into and out of the workforce. And we found that the pandemic was tough, and the past couple of years have been tougher, and that has been, in part because of inflation, but also this attack on reproductive rights, which is an economic and financial issue. Things are better of late, as women are moving back into the workforce, but we're not to the good old days of 2018, 2019 by any means
Josh King: Since launching Ellevest, and certainly over the course of our conversation, you've been extremely outspoken on supporting women financially, and I could almost say empowering, but I know that you wrote this op-ed in Fortune titled, "Why I Am Over Women's Empowerment." What did you mean by that?
Sallie Krawchec...: The term has always bothered me, and I thought it was overused and hackneyed. But it actually turns out that I guess my subconscious heard something I didn't consciously know. The dictionary definition of empower is to be given power, to be given power. And I would argue that maybe women today don't have as much economic power as we want and as much as we will, I hope, after investing with Ellevest and putting together a financial plan with Ellevest, but we do have power. We are 51% of the workforce, 51% of the population. We direct 80 to 85% of consumer spending, and we have trillions of dollars of investible assets. And if we choose to use that power, the sky is the limit for us. And we saw some of it this summer, Barbie, Taylor Swift, Beyonce, these were women stepping into their spending power. And what I really loved seeing is society did try to make fun of us for it.
And then we'll see it. We're moving into pumpkin spice latte season. And so that is major sexism, major mock women for their choice of a beverage and mock them for overspending on that choice of beverage, but when this backlash tried, what are you buying the speeds for Taylor Swift or whatever? Women just didn't care. We're just like, "We are dancing." You can make fun of us, but we are dancing and we are wearing Barbie pink and we don't care. And Barbie was the freaking highest grossing movie for Warn Brothers ever, ever. And so a message would be that there's a lot of money to be made from taking women seriously financially, a lot.
Josh King: I certainly had that experience one morning in June with my wife looking at StubHub and making that decision that we were going to take the plunge for two tickets to Taylor for my daughter and her friend. And that was a good chunk of the monthly wages that went there.
Sallie Krawchec...: I know. And she loved it, right? She loved it.
Josh King: She had the best time.
Sallie Krawchec...: Life is short. In fact, in Ellevest, one of our recommendations is to 30% of your take on paying for fun, 15% for needs, 20% for paying off the credit card, investing in the 401(k), investing with Ellevest. But 30% for fun, and after what we've all gone through with the pandemic, you're damn right. You're damn right I'm going to Taylor Swift. By the way, her dad's a financial advisor at Merrill. So my street cred is her dad worked for me. I obviously worked for him because when you run one of those businesses, you worked for the FAs, but I like to pretend like he worked for me.
Josh King: One thing that stood out for me in that recent New York Magazine piece about you was that you and your husband, who you say you adore, keep your money separate. Is that a recipe for success?
Sallie Krawchec...: I think so. Look, I'll share a little anecdote. When Gary and I were first married and I was in between opportunities, and we were going to go to a cocktail party in a few days, and I remember saying to him, "I think I'm going to get a new cocktail dress." And he turned back to me in the sweetest way and he said, "But you already have one." And my head didn't quite explode, but I did not like that. And again, having this history of my parents having friction around money, I thought, "I cannot."
One of our clients saw one of our clients a few nights ago who said something that just has stayed with me, "If you don't control your own money, you don't control your own life." And that cocktail dress moment, I'm like, "I'm going back to work and I'm going to make my own money. We're going to keep it completely separate." And for us, it's really worked. We split the household expenses and every once in a while we have to rejigger it. But each of us doing our own thing, investing, has worked very well for us.
Josh King: Now, at the moment, my wife and I don't keep most of our money separate, but I would like to see her cry at the sight of your Ellevest bag at the airport and be like one of your clients. For women like that who are listening to the show, what steps should they take to get started with Ellevest?
Sallie Krawchec...: To be clear, for women who are listening, the reason they're crying is because they come and they see my Ellevest bag and they'll say, "Thank you. And I was able to go to business school because I invested with Ellevest, or I feel so much more powerful, et cetera." And I do want you to get your wife involved because, before I get to how to get to Ellevest, something like 75 to 80% of women die single, whether we want to or not. If we are not involved with our money, when it comes back to us, the significant majority, 74% of women have a negative surprise. And 98% of widows and divorcees say the number one piece of advice they have for other women is to be more involved with the money.
It always seems fine, but she will... I hate to say this, I hope I'm not making you uncomfortable, but she'll get that money during the worst week of her life, the worst week of her life. And to be like, "Where is it, and what is it, and how much is it?" Is pretty tough. I want you to send her over to Ellevest for her and everybody else who's listening, ellevest.com, E-L-L-E-V-E-S-T, where you can find the offering, whether it's financial guidance, digital investing, private wealth investing that makes sense for you. You can follow us on Instagram and you can also follow me on LinkedIn.
Josh King: What are some of the models in which people do it? Do they send you a big chunk? Do they do direct deposit?
Sallie Krawchec...: Big chunks are good. I don't want a big chunk. Let's go for a big chunk. But the majority of our clients, the significant majority, and the exact number, I think, it's two thirds, 70%, have recurring deposits. And I don't have to tell you how much sense that makes because you set it, you set the plan, you just let it, the money comes off the top, you don't have to think about it. There's no decision making, and it forces you to, in periods of market volatility, when you want to freak out, it forces you to buy low. And so you're averaging in, which has been one of the very few consistently winning strategies over time.
Josh King: As we wrap up, what are you most hopeful or optimistic about for the next generation of women, whether they're on the sports field, on Wall Street, really everywhere?
Sallie Krawchec...: I am hopeful. I do want to recognize that women's bodily autonomy and reproductive rights have been under attack. I know this is an emotional topic for so many people, but it is a financial and economic issue for so many women and their families, and a negative one as well. And so you always want to be optimistic, but I think we need to recognize that there are some real headwinds that women have been facing that we just weren't expecting to be facing.
And this is going to keep women off of the playing fields, some women out of the C-suite, some women out of the workforce. And so we cannot sort of sit back and say, "The progress is always positive, there are fits and starts." I am hopeful coming out of the summer, again, because of the economic power that women expressed over the summer, but it's been a tough few years and we're going to dance. We're going to dance, we're going to dance together, and we're not going to let society shame us for it. And so for that next generation of women, that positivity, that strength and recognizing that money is power and that is power to be used, does give me a lot of hope.
Josh King: Dancing with Barbie, Taylor, and Beyonce all the way to the bank. Thanks so much, Sallie, for joining us inside the ICE House.
Sallie Krawchec...: Thanks for having me.
Josh King: And that's our conversation for this week. Our guest was Sallie Krawcheck, CEO and co-founder of Ellevest. If you like what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or a question you'd like one of our experts to tackle on a future show or a conversation with someone like Sallie Krawcheck, email us at [email protected] or tweet at us @ICEHousePodcast. Our show is produced by Lauren Sullivan and Pete Ash, with production assistance in engineering and editing from Dean and Wolf. I'm Josh King, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. We'll talk to you next week.
Speaker 1: Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitution offered to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the proceeding conversation may have been edited for the purpose of need or clarity.
