Ellevest's Krawcheck on how Wall Street fails women

Sallie Krawcheck knows about being a woman in a man's world.

A Wall Street veteran, Krawcheck led Merrill Lynch, Smith Barney and Citi Private as CEO. She saw that the traditional world of finance was not properly meeting the needs of women. It's an industry led by men that sets goals based on the needs, preferences and income of men.

So in 2016 she launched Ellevest, a digital investment advisory firm for women.

Krawcheck talked to The Associated Press about how Ellevest designs its portfolios to take into account marked differences between men and women's financial lives, like lower pay, longer lifespans and career absences. Her answers have been edited for clarity and length.

Q. Why do you think women need an investment service tailored to them?

A. It's not that I think they do, it's that the research demonstrates they do. We put in thousands of hours of research and found that many of the myths about women in investing — women are too risk averse, they need hand holding more — are all false.

We turned our attention to the fact that (the traditional industry setup) is just not working for them. What motivates a woman to invest is not winning but reaching her goals — buying a house, starting a business, retiring comfortably.

Q. So what do you do differently?

A. We provide a free investing plan that traditional firms would charge $1,000 or more for, or traditionally would have. And we help give them the tools to determine what they want to do in their life and how they do that, using a very powerful algorithm. I don't want to say we empower them, because I don't like that word, but we give her the tools to make the decisions.

Q. Why don't you like the word empower?

A. I never like it when it is used with women. Women already have the power, we just haven't tapped into it.

We are more than half the workforce, we manage $5 trillion of investable assets in the US and we control the bulk of consumer spending. We have the power, we just haven't used it.

Q. I understand there was some backlash from women when Ellevest launched though, is that right?

A. Yeah, oh yeah. I would say a double-digit percentage of women had a negative reaction. (Women said) 'I don't need a dumb-dumb version. How dare you? This is sexist'.

What happened next was fascinating, some of the women engaged in a conversation among themselves (online). Some pointed out that this is the first (service) that takes into account we live longer and that our pay isn't equal — that isn't sexist it's feminist. The conversation came along and in general, (the criticism) has gone away because the product has stood on its feet so strongly.

What was so surprising about this is not a single woman thought "for women" meant more sophisticated. At best it was parity. That is how we have been socialized.

Q. You've worked in finance for some time, why launch it now?

A. Because you can. The technology has developed in such a way that you can develop an Ellevest. And once I recognized how much the gender wage gap was costing women I had to do something about it.

Q. There's research that shows a general level of discontent by women with their financial advisers. Where does the traditional format go wrong with them?

A. It doesn't reflect them and therefore has not met their needs. It's all about beating the market, not about meeting their goals. It's all about the day-to-day trade rather than the long-term goals. And many women felt like they were being condescended to. There are off-the-charts levels of dissatisfaction.

The industry, when I was in it, would literally talk about women as a niche market. You aren't going to put the same investment effort into a niche as you would another client.