“The reason why I love being here is that it's not just talking about having more money for having more money’s sake, though, there's nothing wrong with that. At its core, we all know that money is power, and that if we don't have as much money as the guys do, we're not going to be fully equal with them.“ - Sallie Krawcheck
Sallie Krawcheck is an inspiring female founder, one of the most influential women in business, and a Girlboss Rally speaker. Sallie has worked on Wall Street for most of her career and was regularly called "the most powerful woman on Wall Street.” She eventually became the CEO of Merrill Lynch, Smith Barney, US Trust, the Citi Private Bank, and Sanford C. Bernstein. She was also Chief Financial Officer for Citigroup. Over the course of her impressive career in the finance world, Sallie witnessed widespread sexism and disregard of women's investing needs.
In this episode, learn how Sallie turned a career on Wall Street into a mission to get more money into the hands of women, why not enough women are investing and how we can narrow the gender investing gap by providing women with the right education and tools to become better investors.
This episode was recorded live in front of an audience at the Girlboss Rally in 2019 with Neha Gandhi.
This interview has been edited for length and clarity.
The reason why I love being here is that it's not just talking about having more money for having more money’s sake, though, there's nothing wrong with that. At its core, we all know that money is power, and that if we don't have as much money as the guys do, we're not going to be fully equal with them. At the center of the Time's Up, and Me Too movement, even though we're not speaking about it, it’s the inequality around money. It is my life's mission to get more money for all of you because I have yet to find anything bad that happens when women have more money.
I spent my career on Wall Street. I grew up in Charleston, South Carolina where my parent’s highest aspiration for me was to be an administrative assistant. We called them secretaries in the day. I had the opportunity to go work on Wall Street where I was an investment banker, which I hated, and a research analyst, which I really liked. I was sexually harassed and all that stuff.
I had the opportunity to have senior roles on Wall Street; I ran Merrill Lynch wealth management, Smith Barney, and I was Chief Financial Officer of Citigroup. I also hold a world record as the only woman to be fired on the front page of The Wall Street Journal, twice.
What made me successful was trying to have a true focus on clients and not let conflicts of interest come to bear — they were the same things that got me fired. I was the only senior executive on Wall Street who returned client money because we had mis-sold products in the financial crisis of 2007-2008, and I was fired for it. Success and failure are two sides of the same coin. I never would have been as successful if I hadn't taken big risks, nor would I have gotten fired if I hadn't taken big risks. You just learn and roll with it.
You've been so open about these moments of failure. How did you build up grit and that ability to shake it off?
By being pissed off and incredibly grateful. I carry around these two overwhelming emotions and thoughts in my head that appear to be in conflict. I am pissed off at the lack of real progress of women in corporate America. I am pissed off that 95% of decision-makers on Wall Street and venture capital continue to be men, which means women's businesses are underfunded. 86% of financial advisors are male and overwhelmingly white on Wall Street. 90% of traders and mutual fund managers are also men, which means women have not been as well-served by the industry, though they've blamed us for it being risk-averse and too girly to invest.
I am grateful for the fact that today, we are all living these amazing lives better than the Queen of England did just 100 years ago — every single one of us with the opportunity we've got. Every day above ground is a good day. When you have that in mind and get fired, you show up again tomorrow. Everybody's too concerned about themselves to care.
With women getting education at a greater rate than men and starting on Wall Street nearly 50/50, why aren't they getting further up?
Society starts by doing a number on us. In households around this country today, little boys are being told to get to the top of the jungle gym, invest, become wealthy and become CEOs. Little girls are being told to be careful, not get their dress dirty, budget, and that they’re not good with money. Little boys today get more allowance for the same chores as little girls. They get better grades in math for the same answers at schools as little girls. When they look up, they see their mother budgeting, and they see their dad investing. Only 2% of households do the mom take the lead in investing. In fact, it is an attractive female quality to be bad with money — it's something that's viewed as feminine.
We're told that we're risk-averse when it comes to investing, which is not true. We're told we're not as good at investing as men — we are actually better. We're told we need more financial education, which we do, but so do the guys. We have been taught to feel not power and strength as the guys do when it comes to money, but loneliness, fear and shame.
With these systemic barriers, what does good change look like both on an individual and collective level?
A lot of people are working on closing the gender pay gap, which is incredibly stubborn. It is decades away from closing for white women, 100 plus years for Black women, and 200 plus years for Latinx women. A lot of folks are working on that, but what I can work on is closing the gender investing gap.
It costs the women in this room by keeping the majority of our money in cash, where we've been told it's safe, hundreds of thousand — for some women, a million-plus dollars throughout our lives. That is leave the job you hate money, take your friggin’ hand off my leg money, build your business money, change your life money, and beach house money.
I’m working to close the gender investing gap and get more women to begin to invest, and yes, take on more risk.
The truth is, if you've got a fifteen-year time horizon, it’s what you should have to invest in equities. If you had invested on any day since 1926 and left the money in the market for fifteen years, you had a 99% chance of a positive return. It's not historically as risky as we've been told it is. By doing this, we take money from being a women's number one source of stress to a women’s number one driver of confidence in our ability to achieve future goals. We can flip this whole thing around.
We are not risk-averse, we are risk-aware. What's the difference? We do not want to take on risk if we don't understand it. When I was running Smith Barney, 86% of our clients didn’t know what a managed account was. Neither gender would ask. The men would still invest in one but the women wouldn't. We see that as women being risk-averse, but we just want to understand it before we invest. Once we understand it, then we're able to take on that risk.
A common misperception is that if you invest, you can’t take it. It’s your money, you can take it out anyday. It's protected through insurance against fraud. It's not spending the money, it's simply taking money that is in a bank account earning very little, and moving it into a diversified investment portfolio in order to have the opportunity to earn a higher return. There’s potentially more volatility in it, but there's no return without any risk. Historically, it has not been nearly as risky as we've been led to believe.
What about people who say, the market signals are currently indicating we might be approaching a recession?
They have no idea, even economists don’t know. Warren Buffett is the greatest investor who's ever lived and he does not market time; he’s not worried about the market going high or low. When Trump was elected, I stayed up all night working on pieces for our client base, because you think the market was going down, but it went friggin’ up.
Nobody knows, so the right way to invest is not to try to pick the right time. Instead, invest a bit out of every paycheck and make a habit of it. Take a little bit off the top, ideally with investing in your 401k — that can be up to 20% of your take-home pay. I know that's tough earlier in your career but maybe you make it 1% out of every paycheck, and a couple of months later, 2% or 3%.
Sometimes you'll buy high and sometimes you'll buy low. Historically, it evens down over time so that you get a market-like return. If you want to outperform, forget it. 0.1% of active managers outperform consistently over a five-year basis. By over-complicating it and trying to call the ups and downs, you’re spending too much energy and cost. The best way to invest is to be steady.
We've got a gift code for you at Ellevest called Girlboss. When you go through the flow, it's going to give you $50 free money to invest. That would be no risk at all. If the $50 goes to $48, you're $48 better off than you were a few minutes ago. Go in there and begin to become an investor and see what it feels like. For those of you who are in your 20s, $1 invested today is so much more than $1 invested in your 30s, 40s or your 50s. You have the opportunity to earn returns and snowball your investments.
We’ve been getting sexist advice about skipping lattes to save money. Can you tell us about your brilliant piece in Fast Company called “Just Buy the F**king Latte”?
Have you ever heard the advice, “don't buy the latte, invest the money instead and become a millionaire?”On what planet does saving a few bucks a day turn into a million-dollars? My real issue with it is the advice tends to typically be given by these middle-aged gentlemen who mansplain this to us when the math doesn't work. What bothers me is nobody saying, “Don't buy the craft beer, or the T bone, or the electronic gadget, the six-pack or anything male in nature.” It's code for hey, ladies, let me patronize you, so that drives me crazy. Again, it’s all about this idea of women saving and getting talked down to. So buy the f**cking latte.
What are some tactical takeaways to get smarter about money? How much money should I have sitting in the bank?
Over time, the goal is to get 50% of your take-home pay for your needs, 30% for fun, because you got to have fun, and 20% is for your future to put money aside for.
In your early years, it may be difficult particularly in one of these big cities where the rent is so much, but that's a goal to drive to. If you have high-interest rate debt outstanding, you want to be working to pay that down. What I mean is any credit card debt above a 10% interest rate, because that's pulling at your wealth and well-being. Same as student loans. If something is below 5% - 6% interest rate, pay the minimum, but you should earn enough in the markets over a reasonable period that you outperform it. If the debt is driving you crazy, get it paid off, life is too short to have it pulling at you.
If you have a 401k, particularly if you have a match, begin investing there. You want to start building an emergency fund in a bank account that is FDIC-insured, low-interest rate, incredibly safe, and has three months of take-home pay. Over time as you have kids and other obligations, take it up to six months to have some cushion. You want to start that investing in that order.
You can find most of this if you go to the Ellevest website to the Ellevest magazine. There are a couple of resources there, one of which is the Go-Getters Guide to Investing, which walks through these steps without all the jargon. The other one is called Mind the Gap, which is a guide to closing all of our gender money gaps.
The biggest challenge as an entrepreneur is paying myself first because I'm so concerned with ensuring that my work bills are paid. Where do I strike that money balance?
You have to take it off the top of some percent of every dollar of revenue that comes in. Whether that is the revenue of your income or the revenue of your business, you have to take it off the top and do this not just for yourself, but for your family, etc. Just do it and pay yourself.
In the future, can I trade through Ellevest?
No, because you can’t be everything to everybody. Buying individual stocks typically has not been a long term winning strategy. You can hit it right, but if you're spending your time doing that, typically you've underperformed the market.
Ellevest started as a digital-first investment platform that can be thought of as robo-advisors for the betterment or wealth front for women. We're the only one that takes into account in our investment plans that women live longer than men, and that our salaries, unfortunately, peak sooner than men. We’re the first that’s gender aware. I thought an investment platform for women was a dumb idea until I realized it didn't matter what I thought — women weren't investing as much as men, and so something wasn't working. We started Ellevest not as a means to trade stocks, but rather how we can help you get enough money to start your business, retire well, have a baby, etc. It's called goal-based planning. There's a build wealth goal as well, and further, there's the ability to invest in other women through an impact investment portfolio.
There are a couple of things that had me started, one of which was, how women are not investing as much as men are. Second, there was a woman who gave me a kick in my pants. She said, “Sally, I'm sick of using my money to support institutions that haven't supported me. I'm tired of having my money managed by companies of which I wouldn't let my daughter work.”
I'm at the stage where I think it's important for all of us to recognize our money is power, our money has an impact wherever we spend it, and wherever we invest it. Whether we're thinking about the impact or not, we are supporting businesses and changing the world with our money. And so being very thoughtful about what we want to support and what we don't.
As an entrepreneur who left corporate America, I'm trying to figure out the best way to start investing again now on my own. How do I get back into it?
It sounds like we're talking about investing for retirement. I talked about the 20% being invested for retirement, as well as for everything else you want to achieve in your life. There are opportunities and options for individuals who don't have a 401k, such as an individual retirement account (IRA). The Ellevest website has lots of articles on it that can walk you through the different options and how to set things up.
What's the minimum people can put into an Ellevest account? What's the minimum, and how do people just get started?
This is an important question for me because investing minimums are by their nature today, sexist and racist. If you've got $250,000 or even $5,000 to invest, who has more of that money? White men. I want to make Ellevest as absolutely accessible as possible, so we have no minimum whatsoever.
I need you to put $1 in for me to give you a diversified investment portfolio, but we wanted to be as approachable, accessible, and have it as your first dollar to invest, as well as when you've got multiple millions of dollars.
We work to serve women through this, and the best part of my day is that after years of working at these big firms where they are literally thankless, I get emails from folks like you saying, “I invested for the first time, I cried, I felt powerful. This is amazing. I'm on my way.” Remember, the act of investing and saving is the number one driver of our confidence in our future because we control this. It’s hands down the most fun I've ever had in my life because I want all of you to have more money.
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