What’s in a name? A rose by any other name would smell as sweet – except for the name “robo-advisor.” As far as Sallie Krawcheck is concerned, that is. To her, the tag “robo-advisor” has the whiff of stinkweed on a humid July day in New York City.
That’s why she calls her firm’s online entry into the robo market a “digital investment platform” or “digital advisor.” Launched in May and targeted specifically to women, Ellevest is meant to “close the gender investing gap” in which women have been marginalized, Krawcheck, chair of Ellevate Network, tells ThinkAdvisor in an interview.
In our chat, the former head of two mammoth wealth management units – Merrill Lynch and Citi – not so much answers that seemingly baffling question: “What do women want?” as she tackles “What do women need” when it comes to investing.
The Ellevest co-founder and CEO, once dubbed “the most powerful woman on Wall Street,” punctuates serious business talk with sardonic humor, a trait that likely served her well in coping with two public firings from her aforementioned wirehouse posts, in 2011 and 2008.
She’d made a name for herself turning around companies. Then, in 2013, Krawcheck became an entrepreneur. That year she bought the professional women’s network 85 Broads, renaming it Ellevate a year later. In 2014 the firm debuted a mutual fund, Pax Ellevate Global Women’s Index Fund (PXWEX), which invests in the top-rated companies in the advancement of women.
Now comes Ellevest. The automated platform is designed to make investing more relatable to the female client as a means of meeting concrete needs and achieving future goals. Women have no interest in the male approach to investing, which pivots on “picking winners” and “outperforming the market,” Krawcheck argues.
Moreover, the traditional approach to investing has largely ignored women’s unique investing needs, according to hundreds of hours of research Ellevest conducted prior to its launch.
Last fall, the firm raised $10 million in Series A funding, led by Morningstar and including financial heavyweights Mohamed El-Erian, chief economic advisor at Allianz and former PIMCO CEO; Ajay Banga, president-CEO of MasterCard; and Robert Druskin, chairman of DTCC, former chairman-CEO of Citigroup Global Markets Holding Co. and former chairman of E-Trade.
Ellevest’s co-founder and chief operating officer is Charlie Kroll, founder of the software startup Andera.
Though woman-targeted robos have preceded Ellevest into the digital arena, Krawcheck isn’t simply hopping on a bandwagon. Long an advocate of harnessing the power of technology for financial services, at Merrill, she kicked off the online Merrill Edge initiative. Later, she was a board member of Motif Investing, a Web-based service.
And as far back as 1999, Krawcheck, then a research analyst with Sanford C. Bernstein & Co., told this reporter, for a profile in Research magazine, that online investing was an important and rapidly growing trend.
Nearly a year and a half before launching Ellevest, she said, in another interview with this reporter, that those who write off robo-advisors are “dismissing an important set of capabilities to leverage the advisor’s time.”
Ellevest turns out to be a user-friendly Web-based service that provides customized portfolios that are designed using goals-based investing. It charges an annual fee – prorated monthly – of 0.50% of an account’s average daily balance. The relatively conservative portfolios are built to at least meet goals in 70% of market environments.
After decades working at big male-dominated Wall Street firms, the New Orleans-born, Charleston, South Carolina-bred Krawcheck has a twofold mission: To help women globally advance in the workplace and to teach them how to invest.
ThinkAdvisor recently spoke by phone with the forthright Krawcheck, whose New York City-based firm resides in the Flatiron District, aka the birthplace of the Big Apple’s tech activity that’s known as “Silicon Alley.” The neighborhood used to be called the Toy District and before that, the Photo District. Like her office locale, Krawcheck has gone through some interesting evolutionary changes herself. Here are highlights of our conversation.
THINKADVISOR: You say that with your digital advisor, women don’t have to worry about financial jargon and performance numbers — you aim to take away anxieties about all that. Ellevest reminds me of the common situation in which a wife is worry-free about investing because her husband takes care of everything.
SALLIE KRAWCHECK: You hurt me, Jane. I hate your analogy.
I’m just doing my job.
All women should be in control of their money regardless of their marital status and how fantastic their marriage might be. I came from a broken marriage. I thought I’d be married to my husband till we were 115. That didn’t work out. He’s now with my ex-friend. But many women are okay with being in the dark about money and letting their husbands handle all things financial.
I think some of that is generational. For younger women, being strong is beautiful, which is different from how women felt several decades ago.
So whom are you targeting?
Ellevest isn’t for the woman you were talking about. We’re not speaking to her. We’re speaking to the woman who could well be married but who likely has earned her own money and likely is making decisions about her and her family’s money.
Still, women have anxiety about the act of investing, as you acknowledge. What does Ellevest do to alleviate that?
Our research found, and I’ve seen this from my years in the industry, that men will invest through jargon; women will not. We try to get rid of jargon and use plain English concepts that women will understand.
Are you appealing more to single women, divorced women, widows, as well as married women?
It’s more of a psychographic than a demographic. It’s Beyoncé, not Celine Dion: This is a woman who’s in control of every aspect of her life but not yet in control of investing her money. It’s about having agency over her money. Ellevest is very different from other Wall Street female initiatives that [depict] us drinking Chardonnay and talking about our emotions around money.
Many women are averse to concepts and marketing specifically “for women.” How do you overcome that?
When we did the first bit of research about our [then-upcoming] investment platform for women, 55% of [respondents] said “Fantastic”; 45% said, “Meh. I don’t know.” There’s this gender bias that “for women” has to somehow be “pink it and shrink it.” But once we began to explain why [Ellevest] was for women – like, the fact that women live longer than men, women’s salary curves are different through the course of their lives vs. men’s and that those issues [and more] have an impact on how much she should be saving and investing to achieve her goals, the feedback went to almost 100% positive.
Ellevest’s Form ADV (as of July 5, 2016) indicates that total assets under management are $136,185, total number of accounts is 40 and average account balance is $3,405. Are those figures accurate?
We’re new. We’re not giving out AUM. We still have a wait list of clients.
How would you describe demographically the clients you’ve signed up?
It’s very early, but [as of now], these are professional women. These are not women who have inherited $20 million. But they’re past the pay-off-the-credit-card stage and into the this-is-starting-to-matter stage. In fact, we tell people with credit card debt not to invest with us – they need to pay that off. We’re seeing women become clients who are as young as 19 and [seniors] that are in their 60s.
How is Ellevest chiefly different from other robo-advisors?
To put together financial and investing plans for women, we’ve built a proprietary algorithm that takes into account the fact that her salary peaks sooner than men’s and that she lives longer than men, both of which, of course, have substantial impact on her financial plan.
What’s special about Ellevest financial plans?
We took away a bunch of stuff that she tells us she’s not interested in, such as outperforming the market. We do a liability-based investing plan in which we help her determine what goals she wants to achieve over the course of her life and construct individualized portfolios unique to her goals. The target is to get her to her goals, or better, in 70% of market environments.
What sorts of investments can folks make with Ellevest?