Sallie Krawcheck | CEO and co-founder of Ellevest also author of Own It:The Power of Women at Work: Ellevest, which is a digital investment platform for women that is unlike anything else that’s out there. We started it from dirt, essentially, there was nothing there. We hired the first person and the second person and the third person, we had lots of ideas about what the business should look like and the product should look like, many of which were mine and many of which were wrong. And we, in a very, as you know, I was a research analyst earlier in my career, and in a sort of research-based way, had co-created an investing platform for women. And so, it’s exciting, because there is what I call a gender investing gap in this country, which is women don’t invest to the same extent men do. And the industries sort of direction to women has been work harder, right? Or we’ll market to you better, and to really from the ground up, say what is broken, what can we fix, and to build it from the ground up is just, it’s amazing. It’s a really amazing experience. And the way the women have reacted, oh my gosh, Betty, I reach out to every woman who signs up, and I’m getting back four-paragraph, six-paragraph, 12-paragraph emails with this is what’s working,
Betty Liu | Founder of Radiate: Their stories?
Sallie: No, no, this is what you can do to improve it, Sallie. This is what worked, this is what didn’t work, you know, 12 steps in, halfway down the page, I mean, it’s amazing. It’s amazing!
Betty: And were you surprised by that?
Sallie: You know, I do know that people enjoy having their opinion asked. But I also know from my other jobs that if you ask it by email, you get the, you know, you get the “jump off a cliff” [response]. So I have been truly surprised by the positive energy around it, by the “this is something Sallie”, “that’s important” and the “we want this to succeed, I feel like I’m part of it, and here’s my contribution to making it better and getting it up and going”.
Betty: Now, what are the parts you hate about being an entrepreneur?
Sallie: The sort of sense of personal responsibility to the people to work at the company. I mean, it’s one thing when you say “Hey, I’m running “Merrill Lynch, and we have 35,000 people here, “and come on in and work.” You know, you sort of feel like, what can go wrong? When it’s “I want you to be the fourth employee and by the way, we haven’t raised money yet, and here’s the vision” there’s just a sense of personal responsibility and not wanting to let them down or let our new clients down.
Betty: This amount of money that you raised, which I believe was nine million dollars, right? And you raised it from some fantastic venture capital companies, other strategic partners, but also people like Venus Williams, Mellody Hobson. Where would you like to see that money be applied to in the next year, in the next two years, I mean, what runway are we talking about?
Sallie: I gotta tell you, I know I’m supposed to say something about how we’re gonna scale and, but the truth is to run the business. We haven’t reached profitability yet, and so there are bills to pay so that we can pay people to come to work, continue to build out the platform, continue to start to get the message out a bit. So, you know, whatever sexy thing I’m supposed to say, pretend like I just said it, but it’s to run the business. The really exciting thing about it was that we were able to bring in, as you mentioned, some venture capitalists, so West Coast, tech-based venture capitalists, Khosla Ventures, women, as well. So you mentioned Venus Williams, Mellody Hobson, who runs Ariel Investments, Theresia Gouw and Jennifer Fonstad who run Aspect Ventures, Sonja Perkins and her Broadway Angels, which is a group of women who invest, Astia Angels, which invest in women-owned companies, Karen Finerman has invested, Andrea Jung, I could keep going with the names, but you know these women. I mean, this is a group of hardcore, crazy-successful, [in] different areas of success, women. What I’m loving about this is the idea that for so many years, we got together, we supported each other, we’d go to a conference, we’d support each other, I mean, this is money. This is money! And so I’ve sort of been playing with and really like this theme of “here are these women investing their money into a business”. Ellevest, which is designed to help other women invest their money, and if you then start to say, “What does money mean in our society?” The answer is power, right?
Betty: It absolutely is, yeah.
Sallie: And so to help these women step into their power, recognize their power.
Betty: Putting their money to work.
Sallie: Just to me, I haven’t quite completed the whole theme in my head, but this idea of women not just helping women, but women investing in women, to help women invest.
Betty: Right, that theme didn’t escape me when I saw the press release and I saw the news about that. Which is that, it’s really about putting that money to work and not about, supporting each other, which is great too, but it’s really about, like “let’s put some money together, make some money as well and let’s build a business”.
Sallie: And what’s fun about it too, is if you were to read the headline, which is, “Fintech company raises second funding round”. You don’t expect then for it to be an investing platform; led by a woman, conceived by women, for women, built by women, and now funded by women and some great guys. That’s not what you expect to see, so that’s sort of fun, to twist that.
Betty: So what about fundraising, though? What are the good and bad, I mean, fundraising is hard. Tell me what you’ve learned about fundraising?
Sallie: You know, look, I’ve been fortunate because I’ve had a career that’s spanned some time, and I know some folks. And so, look the first round was easy for us, it wasn’t easy, but it was easier because..
Betty: So it was funding an idea and funding Sallie Krawcheck?
Sallie: Yeah, and you know, I went to people I’d worked with before, connections I had and didn’t go to a lot of them, and said, “Here’s the idea”. And Morningstar was our first lead investor, and they said, “We get the idea because “we’re in and around the business, and we know you.” So we haggled over valuation and all that stuff, but it was really using that connection that really helped. Look, I’ve had trips, I went out to Silicon Valley and truth is I didn’t go to just one venture capitalist, I went to a number of them. Then I had the experiences, right, I had the super junior guy who, you know, [said] “I don’t get it” and “Women are a niche market,” and I’m like, “Well, you know it’s half the population?”. I had one where, a pretty senior guy every one of the women who worked for him, I mean, when I left the office, they were “Can you give me the top of the waitlist?” “This is amazing,” “I’m telling all my friends,” “We’ve been waiting for something like this.” And as all this is happening, the senior guy’s like, “Nah, I don’t get it.”
Betty: By the way, I just wanted to mention to our audience that they can ask questions to you as well, that’s part of why we’re doing this Facebook live in the first place, is we want to get audience members to also ask you questions so it’s not just me rambling on here. But how do you handle that rejection?
Sallie: You move on. Move on, move on.
Betty: You just say…
Sallie: Whatever! Whatever, water off a duck’s back, right? I mean, look, you do want to get feedback, okay, like “why?” “what is it that isn’t interesting?”. And you want to take that feedback and incorporate it, but so what, you know? I mean, as you noted, and as I was teasing you about earlier, as you noted, I’ve been fired twice, so thanks for putting that on the teaser for this, Betty, really appreciate this. I’ll be sure to pay you back for that some way later, when you’re least expecting it. But, you know, my career has had ups and downs, to walk into a venture capitalist and have him say no to me, is like…
Betty: Is not the worst thing that’s happened.
Sallie: Once again, move on, right.
Betty: Well, let’s talk about, let’s hit that head-on, though, Sallie, because I know she did, right before this interview, give me the hardest time about the tease, which is like, “Why’d you say that I was fired twice?”
Sallie: It was years ago, by the way!
Betty: Years ago, which Sallie has written about quite often, I would just say. But you do have a remarkable story about how you came from these setbacks. You know people wrote about it, it was on the front page of the Wall Street Journal, it was, people wrote about that traumatic moment in your life. It’s been remarkable how you have turned that around, so how did you do it?
Sallie: Do you know it’s so funny, though, it was about two weeks ago, I had a dream that I was at Bank of America, and that Brian Moynihan [chairman and CEO of Bank of America] called over to my office and was like, “Okay, we’re going to fire you”, I’m like, “not again! Not again, like, I do not want to go through this one more time, like seriously, how many times?”
Betty: Does he haunt your dreams?
Sallie: No, no. But look, there’s sort of getting fired for good and bad reasons, right? And when I got booted out of Citi, it was for returning client funds in the down-turn. When I was running Smith Barney, we’d missold products, not because we were evil, because we just, you know, the team just did some dumb things. I fought to partially reimburse clients rather than oh, you know, have them sue us, and I thought it would be the best long-term thing for the business. My boss disagreed, it went to the board and I got fired. It hurt so much, it hurt so much, because I loved that job. I really loved running that business and I miss the people. But these are my ethics, your ethics may be different from mine, we don’t agree and on we go. And then Bank of America, it was never a great fit, you know, it was a reorg [reorganization] and other people were sent away. But when I step back and look it over time, that company, I remember one guy saying to me, “Look, they’re not looking for innovation, they’re looking for process here. And they’re not looking for new ideas, they’re looking for, you know, are you getting the cross-sell done, right? Are you filling in the grid?” and I remember having a feeling of, “I don’t feel like this, this doesn’t feel like me.”
Betty: There wasn’t a cultural fit there?
Sallie: And so there was a reorg and I got sent home with some other people.
Betty: But you saw it coming, right? I mean, I remember you said to me before
Sallie: Did and didn’t, you know, did and didn’t. So on the one hand, I had the classic warning sign, which is I was direct report to the CEO. And I knew everything that was going to happen to the company at the same moment everybody else did. If you work at a big company and you’re senior, and you’re hearing about it the same time the whole company is, you are not on the in team, okay? It’s not going well for you! You’re supposed to hear about it first, just, you know, newsflash. But I had actually put it aside and I kept saying to my team, because Betty, we were the only business, we were ahead of plan. If I recall correctly, we were 13.5% ahead of plan, which for wealth management is a lot. We were the only business in the company that was growing, and we were gaining share, and so I kept saying to my team, “Look, so I’m not on the in team…”
Betty:We’re doing well, but.
Sallie: This CEO’s got so many other issues, so many other things going on, just keep our noses clean, we’re gonna be fine. And I was wrong, I was wrong.
Betty: So when you look at something like the news, the news out on Wells Fargo, for instance, and you see John Stumpf out, apologizing and saying…
Sallie: Yeah, he should.
Betty: And as you say, he should have. When you look at that, do you think thank God I’m out of the banking world, and do you also think, you know, this sort of stuff I’m not surprised by?
Sallie: Well, you know, you get what you pay for and I don’t know their compensation scheme over there, but they made such a big deal out of cross-sell, it’s no surprise that everybody was doing cross-sell. Just like back when I was running Sanford Bernstein, and the industry was paying research analyst to do investment banking business, guess what, they did investment banking business. So you get what you pay for, you know, if you pay for client satisfaction, you’re going to get client satisfaction. If you pay for stock performance, you know, people are going to try really hard for stock performance. So, am I happy I’m out? I wouldn’t go that far, I’m happy I’m doing what I’m doing. I mean, there was a moment where I got reorg-ed out of Bank of America, [where] let’s face it, running Merrill was a lot like running Smith Barney. When you get knocked on the head twice, you say, I don’t really know that karma has a lot of time for me, or cares about me, but if karma did, karma just gave me a message. And that message was, you know, we’ve just knocked you out of a essentially companies that look alike running businesses look alike, maybe you should do something different.
Sallie: And I don’t have to tell you that, because you were there, you went through some of it with me. I didn’t know what it was, for some time.
Betty: I remember that.
Sallie: I mean, I really sort of [thought] what am I supposed to do? What does Steve Martin say in The Jerk, “What’s my higher purpose?”
Betty: I remember that, I remember that. Okay, so we’re getting some questions in and actually some of them are really more, just to back up a little bit. You know, I guess I know you so well that sometimes I just imagine that people know what Ellevest is
Sallie: So they say, “Who the hell is this?”
Betty: No, or what Ellevest is, or what Ellevate does. But tell us about it, just go over, as briefly as you can, but Ellevest, when you go on the platform, what happens?
Sallie: Okay, so Ellevest is a digital investment platform targeted to women. And it is a platform through which you can invest your money. The underlying idea behind it is that women don’t invest to the same extent men do. For any men out there who are watching and saying, “Why do I care?”. You care because if more people invest money in the markets, it’s good for the markets, it’s good to grow companies, it’s good to grow the economy. And what we heard through hundreds of hours of research with women is what was out there isn’t working for them right now, as fully as it is for men and so we did hundreds of hours of research…
Betty: Like what’s not working? Just putting money in mutual funds?
Sallie: Not a woman on the planet we’ve heard from is [saying] “I am dying to choose today”, “today, I want to choose between a large cap value mutual fund and a small cap growth exchange-traded fund, that’s what I want to do today.” What woman has ever said that, right? A lot of men haven’t said it either, but men do it.
Betty: I was going to say, do men say it too?
Sallie: But men do it, right? Whether or not they want to, they do it, and women hold back and don’t invest as much. Here are the numbers; if you make 85,000 dollars a year, you put aside 20% of your income into the back, ’cause you’re saving a lot for a lot of your goals, and you don’t invest, it costs you two million or three million dollars on average over the course of your life, big money. The gender pay gap by the way, will cost you about 1.1 million over the course of your life, for that same person, so it’s big money. So what we’ve built with all this research of women is something in which women or men come in, give us some information, tell us what they want to achieve in life, buy a house, start a business, retire well, you know, you name it, right, big splurge. We use very powerful technology to calculate what each of those will cost, and when this woman [or] man can achieve them. That person can then make trade-offs, I’ll retire at 68 ’cause I want to buy the house in five years instead of six years or whatever.
Betty: Right, so you map out these scenarios.
Sallie: We do, and it’s very powerful technology, we’re the only ones where you can do the trade-offs. We then, and this is free, so you can come in, put together a full financial plan, it’s free. When I was on Wall Street, we charged hundreds or even thousands of dollars for this, okay? You can save it, come back to it, we then provide for you, we build a highly customized investment portfolio whose goal is to get you to your target dollar amount to buy that house, retire well, et cetera, or better, in the significant majority of markets, 70% of markets. Why not 100%? Because that’s saving, not investing. If you fall off track, we tell you, “Betty, you fell off track, either because the market corrected more than we expected, or because you didn’t make your deposit, and in order to get back on track, here’s what you have to do.” So [it’s] very different, and beautiful. It was designed by the woman who works for us, who led the redesign of Vogue.com, right, so it’s a beautiful site and it’s just different. We’re a fiduciary, so we operate in our clients’ best interest, we have four patents pending. Very different.
Betty: So you make money through commission, then?
Sallie: No, no, no, no, no. We make money through a fee on assets under management. So, if we were in Bloomberg, we would say 50 basis points, since we’re in the real world, we would say half a percentage point. And what that actually translates into, which is a lot less than the traditional advisors charge, is that if you give us 50,000 dollars to manage, it costs 250 dollars a year, less than a dollar a business day, for a full financial and investing plan.
Betty: But I could literally go on this site, just go on there, get my financial plan and not put any money in there?
Betty: But I would still get it for free though?
Sallie: Sure, now, you’re going to do a better job of reaching your goals if you invest, in order to do it.
Betty: If we invest and make sure to do that.
Sallie: But what’s so interesting is when we started, everybody said, “Well, women need a person, women need a person” and even the women said, “I’m gonna need a person.” But what we found is that when we took [it] away, we didn’t ask them about standard deviation, we weren’t talking to them at alpha and we weren’t using the word BIPS with them, they said, “You know what? I actually don’t necessarily need a person.” And by the way, a lot of the women and men are using it at night and the weekends. Oh, so the final thing we do, which is important, is we also take into account, super important, no one else does this, women live longer. Ooh, you should really count that when you’re doing a retirement plan! And [the point] that women’s salaries peak sooner, also, depressing, but super important.
Betty: You mean they peak sooner and then they level off or decline.
Sallie: You got it, you got it.
Betty: Okay, so, Phillip Mustert says he would love to get your take on Blockchain.
Sallie: We’re gonna go far field here!
Betty: Totally, like, in a different direction.
Sallie: I think you’d probably give as great, probably a better view. I think, look, I’d say that technology is advancing through financial services everywhere. That anything that can be taken out of human hands and put into, you know, the force of technology is going to be. And so Blockchain I think can be an interesting technology that will enable capital to be capital relief for the banks, by offloading some of the risk and by being a safe way in order to provide transactions.
Betty: Alright, good answer.
Sallie: What’s your view?
Betty: I’ll go with your answer, Sallie, I’ll go with your answer. Okay, so Candice Woodward, this is a long question. I understand I’m supposed to seek out people who have different opinions than me, but I work with a number of people who have very negative attitudes and different views than me. I find I shut them out pretty quickly due to their attitude, so would you have any advice on how you can mold these people, I guess?
Sallie: Oh, man. Mold these people.
Betty: How I can, how I can mold these sorry, I’m like, reading a screen here. How I can mold these experienced yet cynical people so I can build a successful team?
Sallie: You know, I’ve been trying to change my husband for 24 years.
Betty: Old dogs never change!
Sallie: 24 [years], he was a young dog when I started to try to change him, and it’s still like the same! I mean, they’re little things, I keep trying to, anyway, I’m not gonna tell you what they are.
Betty: Does that mean it’s hopeless for Candice?
Sallie: Here’s what I would say for Candice, I have got, I have given a lot of feedback, managed a lot of people over a lot of years, and you can move people this much. I think I’ve had one or two people who I’ve been able to move that much, and sometimes they revert. If you’re trying to take a group of cynical, hardened, negative people and turn them into a group of optimists who work well together, you’re gonna be dead before you do that. Sometimes it’s okay to say “This isn’t the right team”,“This isn’t the right person for the team” or “I don’t want to work here anymore.” And I think, particularly as women, I hear again and again that, “I think I can fix it, I really do, I think if I just had one more conversation with my boss, who doesn’t seem to like me, I can fix it.”
Betty: You mean they don’t want to cut the ties.
Sallie: Yeah, there’s just a sense of because of our relationship orientation, maybe,
Betty: Or just the fear.
Sallie: I don’t know, we’re just, you know, I want to get an A, and I want to get an A on this, and I don’t want to fail. But it sounds like if that team is as you described it, you got a problem. And I would see about moving some, maybe one or two you can keep, ’cause it’s good to have one cynic in a group of optimists. But if it’s a whole group, it’s sounds like a poison cesspool to me.
Betty: So then just leave it at that, then. So Sallie, thank you so much for joining us and for inaugurating our first Facebook live here at Facebook Media Central. Thank you everyone for joining us and sending in some great questions. Be sure, by the way, if you want to hear and watch more of these Radiate Facebook live videos, just subscribe to our Radiate page, which of course, you’re on right now, watching it and you will get alerts to our next great interviews. So Sallie, thank you so much.
Sallie: Thank you, Betty, thank you for having me.
Betty: Alright, bye guys.