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Getting Equality with Men: Embrace Your Natural Strengths to Overcome the Gender Investing Gap, with Sallie Krawcheck, CEO and Co-Founder, Ellevest, and Author, Own It: The Power of Women at Work
Goals Orientation
If you had told me a couple of years ago that I should be able digital-investment platform for women, I would have told you you were sexist, I would’ve told you It was a really stupid idea, and I would have probably been somewhat disdainful to you about it and would have said, women don’t need anything different from men. What you think, our lady brains can’t handle the big man-brain numbers? Well, there are a lot of people working on the gender-pay gap and the gender-work-achievement gap. But it struck me at about the same time that there’s a gender-investing gap that cost women hundreds of thousands of dollars– some more than millions of dollars over the course of their lives because they don’t invest as much as men do.
We women tend to blame ourselves– I need more financial education. I really need to dig in and do this. I just have to find the right company.
But it struck me as I sort of dug into it that maybe the problem is not ours as women. Maybe the challenge is that it’s an industry that’s by men for men– that 86% of financial advisors are men, and that number has held steady for forever. And the words they use– “beat the market,” “outperform,” “pick a winner”– are words of war in sports.
The investing TV is like watching sports Sunday. And the industry symbol is a bull, so it’s a phallic symbol. So in every way, it’s sort of set for men. Include the fact that men will invest through jargon, and women won’t, and you have an industry that doesn’t feel right for women.
When we did our research with women, the concept of beating the market fell completely flat. The concept of winning fell flat. In fact, even the concept of making more money fell pretty flat– sort of surprisingly to me. It seemed like a pretty good goal.
What worked for women were actual goals. So OK, if I’m going to put my money aside and invest my money, I want to be able to, in x number of years, buy my dream home, have a child, start a business, retire well, take their trip around the world. We found that women tend to be more goals-oriented and focused than men.
Risk Awareness
Another finding for us– men tend to, if you ask them the question about their risk tolerance– which, by the way, the whole industry does– men will answer. Women, on average– by the way, they don’t know what it is. We only ever learn what our risk tolerance is, really, when we go through downturns.
But women, we found, were, oh, oh, my gosh. You know what– I’m going to think about that. Let me think about that, and I’ll get back to you. And they never do. It really shuts down the conversation.
And so we, instead of asking a question we know people don’t have the wherewithal to answer, instead, we said, OK, let us learn about you through taking you through the product and the capability. Tell us what your goals are, and then we’ll tell you, essentially, how much risk you can afford.
So for an example, you and I are the same person. We make the same salary, we have the same level of education, we’re the same age. And you don’t have an emergency fund, so you don’t have cash set aside for a rainy, rainy day. Any you want a baby in four years. I just need to retire.
It doesn’t really matter what I think my risk tolerance is. You don’t get a lot of risk. I get plenty of risk. And so we tweak things like that, as well as really making it– so making it goals-based, approaching risk differently, taking to account, again, that women live longer and salaries peak sooner, forecasting out their life curves.
And then the most important change we found is that most people think of and describe women as risk-averse investors. What we found– maybe a subtle point is women are risk-aware investors. And what they wanted was not, hey, explain risk to me and standard deviation, and let’s really go through that statistical analysis, but more, hold on– how bad can it get?
And so what we do is we track you– track women to their goal. And say in x% of markets, it could be this bad and y% that bad, and if you fall off track– if you fall off track to reach your goal, we’ll reach out to you, tell you you’re off track, and tell you what you have to do to get back on– deposit another $1,000, retire six months later.
So those are a few of the differences, some of which are straightforward and others of which are more subtle, that we found were barriers to keeping women from investing.