SpeakEasy is a running feature in NJBIZ in which we recap presentations given by key business leaders around the state at one of New Jersey’s many conferences and events.
This report is based on a speech delivered by Sallie Krawcheck at Women Entrepreneurship Week at Montclair State University.
In 2006, Sallie Krawcheck ranked No. 6 on Forbes Magazine’s list of the “World’s 100 Most Powerful Women.”
In 2011, she was the first woman to twice be on the cover of The Wall Street Journal — for being fired.
It’s all in a career, she told more than 300 at Women Entrepreneurship Week at the Feliciano Center for Entrepreneurship at Montclair State University recently.
“Therefore, it’s also not unusual for us to have career transitions in order to shape what we are doing,” Krawcheck said.
For Krawcheck these days, that includes running Ellevate Network, a global professional women’s organization of more than 34,000 members.
It’s not exactly what the self-proclaimed “Wall Street girl” with a bachelor’s degree in journalism and an MBA from Columbia Business School thought she would be doing after having worked up the ranks from investment banking analyst to CEO of Citi’s Wealth Management division in 2008 and then as CEO of Merrill Lynch Wealth Management and U.S. Trust (the two jobs from which she was fired).
Her career transitions did, however, spur the idea that led Krawcheck to her current job — chairman of Ellevate — and it made all the sense in the world.
“I was thinking — as we all do while putting on our mascara in the morning — about the retirement savings crisis in our country,” she said with just the right touch of wit.
According to Krawcheck, estimates state that the U.S. has a retirement savings gap of anywhere from $8 trillion to $14 trillion.
“It’s not a problem tomorrow; it’s a problem in the future,” she said. “Therefore, we as a country have stopped talking about it.”
Asking vs. offering
In order to raise capital for Ellevest, Sallie Krawcheck turned to her friends.
“That made my stomach hurt,” she said. “What if I took money from my friends and I lost it?”
But Charlie Kroll, her co-founder, helped Krawcheck see it from a different perspective.
“He said, ‘If you believe in this idea, then you are giving these people an opportunity. It’s not that you are asking — you are offering. You are doing them a favor,’” she said.
To Krawcheck, twisting it in that way made all the sense in the world.
Ellevest was founded in September 2015 with $2 million in starting capital.
As she separated her lashes, she said, a more daunting thought occurred to her.
“‘Son of a gun,’ I thought, ‘This is a women’s crisis,’” Krawcheck said. “We ladies today retire with two-thirds the money of men — and, on average, we live six to eight years longer.”
The more Krawcheck thought about it, the more potential solutions to the retirement savings crisis changed.
In order to solve the issue, she said, the gender pay gap must first be closed.
“By some estimates, we would actually close the Social Security savings gap by a third,” Krawcheck said.
Next, close the business achievement gap: “Keep us women in the workforce longer because then we are paying into Social Security and our 401(k) at a higher rate,” Krawcheck said.
These first two solutions alone were enough for Krawcheck to change her career trajectory.
“I first became interested in Ellevate Network because it struck me, as I thought about the causes of the financial crisis, that in (some of the) companies in which I had worked … the teams that I had been on suffered from grouping,” she said. “They all went to the same schools, the same training programs, grew up together, vacationed together, put their kids in the same schools, and they all agreed with each other that the market was going to continue going up. It did not.”
In the end, the more diverse teams that Krawcheck had worked on — despite making slower and more laborious decisions — always made more effective ones.
“The power of gender diversity is so great that diverse teams outperform smarter teams,” she said. “They have higher returns on capital; they take on less risk; they have greater client focus; and they have more long-term focus.”
Krawcheck blogged and tweeted and posted about the issue on her social networks. But she knew it wouldn’t be enough.
“When we go into business and the gentlemen begin to achieve more than we do — such as getting promoted in their mid-30s — it is because they have stronger networks, both internal and external,” she said.
Proving a good value
According to Sallie Krawcheck, women and millennials are “so much more alike than they are like existing core investors today.”
But while more than three-fourths of these demographic groups have expressed interest in values-based investing, less than 10 percent of financial advisers have actually shown them anything like that.
In 2014, Ellevate Network thought to set a good example.
As chairman of the Pax Ellevate Global Women’s Index Fund — the first broadly diversified mutual fund that invests in the highest-rated companies in the world in advancing women’s leadership — Krawcheck makes sure that a portion of Ellevate Network’s funds are invested toward supporting women-owned companies.
So, Krawcheck bought a women’s network group in 2013.
“I know what I said for years: ‘I know I should network; I really should, but I am so dang busy. I just don’t have the energy for it,’” Krawcheck said. “Ellevate provides a forum for women to come together … as well as education on how to use social media, how to negotiate, how to raise money, etc. That is what our network is for.”
Solving the retirement savings crisis, she said, is key.
“I’m not hearing anyone else talk or think about closing the gender investment gap,” she said. “Men today leave their financial advisement firms in which they’ve grown very accustomed to at a rate of 2 percent a year.
“Women, when their husband dies first, leave their financial adviser over the next year more than 70 percent of the time.”
As a result, Krawcheck said, cash represents 68 percent of women’s total investments — and it just isn’t working hard enough for them.
This past September, Krawcheck set out to change that, so she co-founded Ellevest.
“We’ve raised $10 million to build a technology product in which to go after this issue,” she said.
As CEO of Ellevest — in addition to her work with Ellevate Network — Krawcheck’s first task was to make absolutely certain that she went into business with a co-founder who could not be more different than her.
She found such a partner in Charlie Kroll, the former CEO and founder of Andera, a venture-backed provider of cloud-based customer acquisition solutions in financial services.
It was imperative to Krawcheck that she build a management team of people who were not only from all different backgrounds outside of financial services, but also gender-diverse.
“Research shows that women are more risk-averse than men, but I would argue that women are more risk-aware than men,” Krawcheck said. “We are more realistic than men. We recognize that there is a real chance of failing.”
Failing. She knows all about that. Just ask the Wall Street Journal. This time, however, it’s different, as she feels a greater personal responsibility.
“You have to really want to be an entrepreneur in order to take on that personal stress,” Krawcheck said. “But the No. 1 reason men start businesses is for money; the No. 1 reason women start businesses is to work at a company they want to work at and have the impact they want to have.”
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