Sallie Krawcheck Shares Insights on Women and Investing

In this podcast, Motley Fool analyst Deidre Woollard talks with Sallie Krawcheck, co-founder and CEO of Ellevest, a financial company built by women, for women, about how she's helping more women invest and a lesser-known savings tool for investors who want to give back.

Dana Corl Kasarda, an operations manager at The Motley Fool, talks with Kathryn Tuggle, co-author of the new book How to Money, about some of the positive ways that stereotypes are changing for women and investing.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on May 29, 2022.

Sallie Krawcheck: When you get on a Zoom call with a guy, how many of them have a kid hanging off their neck? How many women do? It's like you're right, you've always got the woman with a toddler and the kid and the cat screaming in the background and the parent, can you come get me this. What we found when we went back into the home is some of the old gender roles not only stayed, but were in fact reinforced.

Chris Hill: I'm Chris Hill and that's Sallie Krawcheck, the CEO and Co-Founder of Ellevest, a bank and robo advisor designed specifically for women. Women have different challenges in investing, including a wage gap and a longer life expectancy. Today, we've got a couple of conversations addressing some of those challenges. First, Deidre Woollard talked with Sallie Krawcheck about the funding challenges for female entrepreneurs, how women invest differently than men, and a lesser known savings tool for investors who want to give back. [MUSIC]

Deidre Woollard: Welcome, Sallie.

Sallie Krawcheck: Thank you. Good to be here.

Deidre Woollard: Well, I was excited to see that you've recently raised a $53 million Series B funding round and you had mentioned that two-thirds of your investors were female, which I thought was fantastic. What are you seeing in the landscape for female VC investing?

Sallie Krawcheck: Actually, 90 percent of investors in this round were underrepresented investors, so women, people of color, women of color, LGBTQIA. We're really excited that the work we're doing to help women invest is actually extending to women investing in Ellevest. What I'm seeing is a lot more money and women coming in at the seed in Series A level. I'm seeing that women entrepreneurs outperform male entrepreneurs in crowdfunding. Unfortunately, I'm seeing a Series B cliff when it comes to women CEOs raising larger amounts of money. That I think it's in part because you don't have as many women writing those big checks and so you just run into a little bit of a wall when you get to the bigger dollars. Despite the fact, by the way, that the research tells you the women run businesses perform as well, there's research that says better than men run businesses, start-ups.

Deidre Woollard: Do you find that the type of business of women entrepreneurs matters? It seems to me that the bigger funding rounds I see seem to be very women-centric businesses whereas other ones maybe not so much.

Sallie Krawcheck: I was literally having this conversation three minutes ago. Well, you know it intuitively, there's research that says those businesses that are more traditionally female-based, female-oriented are ones that tend to get funded. Put another way, if you look at the number of fintech businesses, Ellevest being one of them, that have raised more than, call it $100 million in total funding, I think it's five. Whereas there are dozens and dozens run by men, and so it's how we socialize when we think of start-up CEOs, we think young men, and where we can shift that to being women or things like, of course, they understand clothing, makeup, etc. I applaud them. I applaud those women. They're doing tremendous things. I also hope that we can expand out the types of entrepreneurs that we're funding.

Deidre Woollard: Absolutely, yes. Well, let's talk a little bit about socially responsible investing, and doing well by doing good. I've invested for a long time. I'm starting to think about this more in my portfolio, but also struggling with that idea of balancing returns and ESG concerns, so how do you wrestle with that?

Sallie Krawcheck: I think you should leave that worry behind on the idea that you, by definition, must give up return in order to invest in companies that are advancing women, companies that have strong governance, companies that are doing good things for the environment. Why is it that those things should cause a decrease in return? Why should it be the companies that are not diverse that have better returns? In fact, the research tells us it's the exact opposite. That it was true years ago when ESG investing was new, when it was all about not investing in X or Y company. But we've moved forward from that and the business, there's much more data around. It has been professionalized. Look, I would actually say to you, you're investing for impact today. You are, you just don't know it.

Deidre Woollard: One of the things that we're seeing I think, is that companies are spending more time at least talking about ESG issues. Are you concerned in some cases that you're seeing a little bit of like greenwashing and things like that?

Sallie Krawcheck: Yeah. But I'm concerned that people talk about diversity more than they do it too, and I'm concerned about all of that. But what we can't do is wait for perfection in order to take action. We should get more and more information over time. That as technology advances is more businesses are formed about this. There are more data sources now than they ever were. When I first got involved in gender lens investing with the Pax Ellevate Global Women's Leadership Fund. In the very beginning, we're actually literally counting women. How many women in the leadership team? Let's look at the annual report. Alex, what are we thinking in here? Robin, what are we thinking here? Now there are many more data sources so [inaudible 00:06:08] is the best disinfectant. All of that will start to become clear. There will be more information. It will be right on our phones. We'll be able to see it. It'll take us to where we want to buy from, take us to what we want to invest in. But of course, people are going to exaggerate in the meantime, and such is life.

Deidre Woollard: Well, at least, the exaggeration is at least means that there's focus on it and potential to change over time, which I think we're at least going in the right direction, I'd like to think.

Sallie Krawcheck: Well, I hope so because we need business to help us change the world. That particularly in the United States where our own government is certainly not providing, say, for example, the social safety net that we need and could use. Companies are having to step up and where the government is not perhaps taking as much action on the environment as we would like for companies to step up. I sure as hell hope that companies are taking it seriously and stepping up because we really are not able to completely depend on government.

Deidre Woollard: Very true. You tweeted something recently that I thought was interesting, connects to this idea which is to stay involved with your money, and I think this is hard for people, especially for women that sometimes we're great at the earning part, but the investing part, we feel a little less confident on. How do we shift that?

Sallie Krawcheck: Well, the reason we feel less confident is we have a lifetime of being told that we shouldn't be less confident. That articles written to men around money, 72 percent of them are positive and about expansion and growth, and it's all abundance. When men think about money, they tend to automatically go to power, strength, and independence. For women, 90 percent of articles are about scrimping and saving and how hard it is and how challenging it is and don't buy the latte and don't have the facial and you buy too many shoes. By the way, rather than like there's a systemic issue, it's called the gender pay gap. This is actually literally not your fault. Instead, it's like, man, if I just wouldn't drink the latte, I will be able to retire. There's a lifetime of that and it's all about scarcity.

Of course, women, they feel loneliness, they feel isolation, they feel uncertainty, no wonder where [inaudible 00:08:36]. Let's combine that with the fact that we are told as little girls that we need to be pretty close to perfect. You sit in class and the guys are running around, little boys are running around, the girls are having to sit like that and don't get your dress dirty. Girls when they don't get As, oh, no, and so we are pushed toward perfectionism at the same time, we're being told that we're no good with money.

Why would we want to invest? Why wouldn't we want to keep it in the savings account? Of course, the reason is because it cost us hundreds of thousands for some millions over the course of the lives, and our industry's response has been marketing campaigns to women. It's really only Ellevest that stepped in and said, let us change the underlying product for some of those in the intro, some of the realities for women that we have to invest differently because we earn less, we take more career breaks, we live longer, we have to take those things into account in investing, that if we just think it's average, we could fall short.

Deidre Woollard: Absolutely. One of the other things that I've heard a lot which I'd like to explore with you, which is the idea that women are risk-averse. We hear this all the time, women don't like risks. Women aren't going to take risks. We're seeing it right now in cryptocurrency. Some of the surveys that are coming out are saying women are missing out on crypto. What do you think about women?

Sallie Krawcheck: Just having a big decline.

Deidre Woollard: Right about now.

Sallie Krawcheck: What that actually does is they're simplifying assumption there that we the industry, what we're offering is chef's kiss and the fact that you women are not investing means it is your fault in your risk-averse. What I would argue is there is a difference here that may feel a little subtle but it's important, women are risk-aware. We want to understand the risks that we're taking. By that, it's how much could this go down? If I invest historically, what would my types of returns have been? How bad could it have gotten? Again, that's why Ellevest changed the underlying product to address that. Ellevest was the first to say, maybe it's not them, maybe our industry, which is very majority men, built the business for themselves and didn't take into account some of these more subtle differences. As we began to say, your risk-aware, let us give you the information you need in English, then we became certainly the first investing firm built by women to get to the size that we have.

Deidre Woollard: You've got stocks, ETFs, all of that. What are you thinking about crypto, and what about other alternatives, things like crowdfunding and things like that?

Sallie Krawcheck: Crypto, I think has to date, small part to play in a diversified investment portfolio. That's not the way most folks are using it, of course, today, most of those more of a some are investing, a number are trading. We're again not big traders regardless, and crypto can provide shorter history but provides some diversification. When you get into alternatives like hedge funds, not as big a fan. The hedge fund managers that much better than the mutual fund managers to be trading the same stocks and get better returns. The research tells us pretty much no. Where it starts to get interesting are things like angel investing in where women start-up CEOs, where it is as forest management, which obviously can have such a positive impact, where it's investing in the sustainable housing. Those things to me into our Chief Investment Officer are just not only do they provide diversification, but they also provide direct impact, and you just can feel great about you're able to through Ellevest, see what that impact is. It goes from being theoretical to we rehoused x number of women in transition from, say, abuse relationships into sustainable housing. To me, that's great investing.

Deidre Woollard: Are those non-profits? Are there tax benefits involved with those types of cases?

Sallie Krawcheck: It can be, not non-profits. These are investments and so there are returns to be made as those houses are fixed up and at some point sold as rent comes in, etc. Again, you go back to, you can earn a financial return while having a societal return as well. Those two things are not mutually exclusive. Also, all good doesn't have to be done through non-profits and in particular, for people who are giving their money away to non-profits. We've had clients who realize they're giving their money because they want to go this way, but their investments are going that way. Their non-profit contribution investments can be working against each other as opposed to with each other.

Deidre Woollard: What do you think about donor-advised funds and instruments like that?

Sallie Krawcheck: That's right on target. Again, we love them and find so many people are investing, not thinking about how that money that's been sitting there to be given away, how it can have an impact before it's ever given away. They'll invest annual on S&P 500 or something as opposed to, I'm really all about what are equity. I want to give the money away for that, and in the meantime, I may be investing in companies that are, again the exact opposite.

Deidre Woollard: That relates to another thing that I'm thinking a lot about lately, which is the ageing of America demographics. We keep hearing about the great wealth transfer. Not something that's happening yet, but it's going to happen in the future, and I think that has a lot of impact on women. What advice do you have for people that are stuck a little bit in that sandwich generation that so many of us find ourselves in trying to advise our parents and then trying to deal with those assets?

Sallie Krawcheck: Look, these are very human, can be very difficult conversations, where women so often get stuck providing the care for both the parents and for the children. If none of us really were attuned to it, the pandemic sure made it clear. Although it's interesting to me how some people don't see things. I was on a call a few months ago with a fellow I used to work with and told me about how the pandemic had set women back economically and financially, and how women actually are getting fewer promotions at work. He's like, what I would've thought, being at home would've been helpful, they can get more work done. I'm like, OK, when you get on a Zoom call with a guy, how many of them have a kid hanging off their neck? How many women do? He's like you're right, you've always got the woman with a toddler and the kid and they kept screaming in the background, and the parent, can you come get me this.

We found when we went back into the home is some of the old gender roles not only stayed, but were in fact reinforced, or definitely reinforced. As a result, even those women who were privileged enough to work from the home during the pandemic just weren't getting the promotions, and women, of course, lost jobs at disproportionate rates. On one hand, as the wealth transfer happens, women are going to be beneficiaries. We live longer than men do, so we will receive that money as our partners pass away, 80 percent of women die single. Will be the beneficiaries unfortunately if we have outsourced management of the money to our partner, 74 percent of women tend to have a negative surprise when the money comes to them, they will get it, it won't be as much as we thought, we'll get some money from the parents. But there's a price that we pay for that, which is that caregiver role. That is been the way of the world in our society for too long.

Deidre Woollard: Eighty percent of women die single. That's an important underlying there because that means that we all need to make sure that we understand our finances, that we don't outsource it to partners or really anybody else.

Sallie Krawcheck: No doubt. It's interesting 80 percent of women die single. When they do, 74 percent have a negative surprise. That's not half, it's six to one happened, 74 percent. Something is happening there. I think the thing that's happening there is women have been socialized. You're not good with money and like oh thank God, let me just leave it with him and I'll take care of this other stuff and I'm busy. The other thing that's happening is he feels the pressure. Because society tells him that he is the breadwinner, he is the one who is supposed to be good with money. He is the one who tends to be more overconfident on money, so he's not telling, he's carrying the burden alone. Think about that lonely moment. She's left out, he's got the burden and neither ends up in a good spot. [MUSIC]

Chris Hill: Next up is Kathryn Tuggle. She's the Editor-in-Chief of the website HerMoney. She's the co-author of the brand new book, How To Money. Dana Corl Kasarda talked with her about some of the positive ways that stereotypes around women and investing are changing. [MUSIC]

Dana Corl Kasarda: Can you talk a little bit about your upbringing and how that has shaped your relationship with money?

Kathryn Tuggle: It's a great question. I definitely don't have the typical upbringing with money that I think a lot of people in New York have. I am a mixed-race woman from rural Alabama. I grew up selling vegetables on the side of the road with my grandfather. We were middle-class, I would say, but saving money was everything. I got a lot of education about saving money, zero education about investing money. [laughs] But I am very thankful for what I was taught from an early age which is self-sufficiency and saving.

Also in Alabama, when I was a young adult there I also taught yoga at Tutwiler Prison in Alabama, which is a women's prison in Alabama. I have to say that this experience made a big impact on me and that it deepened my passion for really fighting for all women, especially marginalized women who are often intentionally excluded from pathways that would allow them to build wealth. I think my upbringing overall has really made me very passionate about spreading the word to all women about what it means to come into your financial power and what it means to have an understanding of your money and where your money is going.

Dana Corl Kasarda: The sentiment is really that women are taught to budget and men are taught to earn. What are your thoughts on that message that we've sent to young people, starting in money and even before?

Kathryn Tuggle: First of all, it's absolutely true. This is the reason why HerMoney exists, is because women invest on average 40 percent less than men, which is frankly dangerous. We live five years longer than men on average. The gender wage gap means we're earning about 83 cents for every dollar that a man earns, so we're faced with that coin to central problem of having to do more with less. The narrative that young women are taught which is to save and budget is great, we all need that, those are the building blocks. But women also have to be educated on how to make their money last.

Dana Corl Kasarda: Do you think any of that has been influenced by the pandemic? Have you seen any trends or changes in the past couple of years?

Kathryn Tuggle: It's a great question, and I've been pretty encouraged with the data that we've been seeing post-pandemic. We're seeing that women are actually taking more control of their finances, and we just did some research on this month, it's a research by HerMoney and the Alliance for Lifetime Income. It's our state of women's survey for 2022. Basically, what we found is that women are breaking down stereotypes and taking control. Ninety-four percent of women who are partnered said that they are engaged in managing their investments and they are engaged with their retirement planning.

Previously, as we know, we have been seeing women were taking a back seat on those bigger-picture financial aspects of their life. It's been great to see that changing and women getting more into the driver's seat. I've been thrilled with the positive reception that we've gotten for our book How To Money, which was specifically written for young women. Just to see moms, and aunts, and grandmothers buying that for the young women in their lives has been so beautiful.

Dana Corl Kasarda: In the time that HerMoney has been around, has the way that they've spoken to women and given guidance changed?

Kathryn Tuggle: Yeah, we launched our podcast in 2016 and we launched our website in 2018, and since then, we've really seen a lot more companies particularly, Fortune 500 companies pledging to end the gender wage gap and to have pay parity, and to have pay transparency, and since that time, we've also had the pandemic, which was terrible for women. It took more women out of the workforce, there's still 1.1 million women who have not reentered the workforce post-COVID. But I also think that the conversation is changing around workplace flexibility. I think more places are allowing remote work flexibility, and flexible working hours and more companies have awakened to the need that women often have with child care, so I do think we will come out of the last few years with more options for working than women have ever had available before.

Dana Corl Kasarda: That's great. Very positive. I love the idea of women growing in that space. Studies have shown that women make better investors, what are your thoughts on that?

Kathryn Tuggle: I think my favorite studies have shown that women are less likely to see the stock market as a game to be played than men, and we're more likely to want to be investors for the long haul. We want to play the long game. We are generally better at taking a 360-degree view of our entire financial picture to really see what's going on and to see that road ahead, and to your point earlier, we're better savers. Being risk-averse can be a negative thing if it prevents us from getting started on our investing journey, if it prevents us from ever opening a brokerage account in the first place. But the right amount of risk aversion can also be a really good thing if it inspires us to think decades into the future and to play that long game for our retirement.

Dana Corl Kasarda: It's graduation time, we just had Taylor Swift give an NYU commencement address. If you were to give the commencement address today, what would you be telling new grads?

Kathryn Tuggle: It's hard to think of things that haven't already been said that don't sound trite. Just because I'm feeling so optimistic about the current hiring market, I'm feeling really optimistic about our interns that we've had at HerMoney from the past few years. They're so bright, they're so much better than I was at that age. They are so with it, they are so together, they are so organized, and they're showing up to work fully and completely and wholly themselves. I would say don't let anybody diminish your light. Don't let anybody tell you that you should be doing something else, or that you should think about doing something that you don't like to make more money. I was able to build a career doing what I love which is writing and I believe that people should boldly go in the direction of their dreams. Like I said, it's a great time to get hired right now. Put yourself out there. Give us a clever cover letter and I will definitely have you in for an interview. But I'm feeling really good about the prospects for this graduating class.

Dana Corl Kasarda: That's so heartwarming. I feel like I just graduated. [laughs] Thank you so much, Kathryn. This has been so wonderful. Thank you for sharing. [MUSIC] I can't wait to continue to recommend How To Money. It's been a pleasure talking to you today.

Kathryn Tuggle: Thank you so much, Dana, this was great.

Chris Hill: That's all for today. Remember, the stock market is closed for the Memorial Day holiday, so we'll see you on Tuesday. As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill, thanks for listening. We'll see you on Tuesday.