The coronavirus pandemic has dealt women a severe economic blow causing “a backward shift” in their financial advancement that “will have ripple effects for years” and has potential to set their economic progress back decades. This female recession, or “she-cession,” as it’s been dubbed, is “horrifying,” Sallie Krawcheck, CEO and co-founder of Ellevest, worries in an interview with ThinkAdvisor.
Compared with men, women have lost more jobs in the pandemic because, says Krawcheck, formerly head of the wealth management units of Merrill Lynch and Citi, women are “over-represented” in service industries, those hit hardest by the scourge.
Further, fewer women than men are securing new jobs; and many women, working from home since the virus hit, have lost job productivity and are missing out on promotions.
A critical aspect: Women working remotely are also bearing more child care responsibilities than men. Partially as a result, 865,000 women left the workforce in September. That’s four times as many versus men who dropped out, according to the Bureau of Labor Statistics and the National Women’s Law Center.
“For some women, the damage will be long-lasting,” argues Krawcheck, once known as “the most powerful woman on Wall Street.”
One reason for her grim forecast is that amid the pandemic, many women ceased contributing to their 401(k) retirement plans or ran up heavy credit card debt — or both. Some withdrew savings from their 401(k)s to live on.
Four years ago, Krawcheck co-founded New York City-based Ellevest with fintech entrepreneur Charlie Kroll — who left the firm last July — with a mission: “To teach women to invest,” as she frames it.
The firm, growing steadily, has expanded its services from low-cost digital investing — via ETFs — to include a private wealth option for high-net-worth and ultra-high net worth clients with an account minimum of $1 million.
Ellevest has just raised $7.5 million in funding from Allianz Life Ventures, a part of Allianz Life Insurance Co. of North America. Other investors include Mellody Hobson, president and co-CEO of Ariel Investments; Mastercard; Morningstar; PayPal Ventures; and Pivotal Ventures, funded by Melinda Gates.
Krawcheck, chair of the Ellevest Network of Professional Women, which she founded in 2013, began in financial services as a research analyst covering the brokerage industry.
In the interview, she discusses Ellevest’s consistent growth during the pandemic and the firm’s new products and capabilities introduced this past summer. At that time, the company also expanded the Ellevest Intentional Impact Portfolios — for Private Wealth Clients — to include a racial justice lens.
According to Ellevest’s Form ADV of June 2020, the firm manages $634 million in client assets. In view of its rapid growth rate, that amount is now likely to have surpassed $850 million.
ThinkAdvisor recently interviewed Krawcheck, speaking by phone from her Manhattan home. Discussing her goal of “getting more money into the hands of women,” she has firmly rejected the conventional Wall Street wisdom that women are risk-averse. Rather, she contends: “The industry hasn’t done a good job of engaging women and helping them to understand risk.”
Here are highlights of our interview:
THINKADVISOR: Women are in a “she-cession” that has shaken their financial stability, you say. Why did this happen?
SALLIE KRAWCHECK: It’s horrifying. Women who shifted to working from home have lost productivity. Men have gained productivity. Compared to women, men have been promoted during the pandemic at a rate of about 3 to 1. We believe that as women had to move into the home because of the pandemic, the traditional gender roles reasserted themselves. It’s been truly unfortunate.
Why have women lost jobs at a faster rate than men?
Because women make up a greater share of service workers. And for essential service workers, of whom women are a bigger share, it’s been a greater health risk for them too.
You call what’s happened to women a “backward shift.” Women have been making good progress over the last four decades, have they not?
Women still earn 82 cents to a white man’s dollar. And what’s particularly unfortunate is that women started the pandemic with 30 cents of wealth to a man’s dollar. That was already going backwards. Now we’ve gone backwards even further. Women don’t invest as much as men do. Women have more student loan debt. Women don’t have as much savings as men do.
This “backward shift” is “unprecedented and will have ripple effects for years,” you’ve said. When will women return to where they were financially before the pandemic?
For some, the damage will be long-lasting: They’ll return to the workforce, but they’re never going to get back the [lost earnings on their retirement savings] because they didn’t make contributions to their 401(k)s. They’re never going to get back the money spent for [goods and services] they ran up on their credit card to keep the lights on. Some of this is lost for their kids, too, like [educational] enrichment they planned for them but were unable to provide.
How has Ellevest fared during this difficult year?
We’ve been growing. We’ve had net inflows every single week since the beginning of the year — including all through the pandemic.
To what do you attribute that?