Women Live Longer, Earn Less

When applying to an asset placement service or hiring an another financial advisor you will most likely be offered to fill in a survey on how much risk you are prepared to take. Ellevest – an investment platform for women only – finds such surveys meaningless. “The reality is that nobody knows their risk tolerance,” says CEO and co-founder of the company Sallie Krawcheck. However the men, in her opinion, will answer that they are ready to take a medium or high risk while women will “hold, investigate everything and only afterwards they will answer because women are scared of risk”.

Based on Ellevest’s research and scientific data it’s been concluded that the fact that women do not want to worry about the possible consequences of the risk cannot serve as the basis for the creation of female-only investment platform. However Krawcheck and her wealthy supporters believe that the analysis of such behaviour, combined with lenghtier lifespan of women, lower income and the dislike for Wall Street, will ensure the demand for such service and it will become available to the public in November this year.

 By annually paying 0.5% of the value of assets women will receive  savings plans and customized portfolio for low cost exchange trade funds from Ellevest which would meet the goals of retirement, real estate purchase or childbirth. Although it is only half the price a real consultant – living being would cost, it is still twice as higher than Betterment, the largest independent AI-consultant would cost.  WorthFM, another robot consultant designed specifically for women began to work in February and also charges 0.5% per year.

Sallie Krawcheck (52) is the undisputed leader of Ellevest. She has held a number of high-level positions in Wall Street for more than ten years, managing such as Sanford C. Bernstein, Smith Barney, Citi Wealth Management  and eventually Merrill Lynch- an army of fifteen thousand brokers, from which the majority are men.

XX Factor

Women live longer, earn less and they do not have a belief in the usefulness of investments like mine have. But will they pay more for a personal robot consultant which cares for a woman’s needs and desires?

Samantha Sharf

The Wall Street veteran Sallie Krawcheck has once again proven herself as a smart woman who knows how to deal with money.

After the parent bank- the bank of America reorganized Merrill in 2011, Krawcheck had to leave it and she declared herself a defender of women. In 2013 she bought 85 Broads, a company that manages programs designed for business women and renamed it as Ellevate Network. This separate Ellevest  site knows how to make money by promoting itself with bold slogans such as “Money is Power” and by using hashtag #FinancialFeminist. An advertisement with a silhouette of president Trump and a provocative inscription: “women of New York: cover your a$$” was set up near the Manhattan main office.

Even though such politically targeted advertising has attracted interest in Ellevest, concerns about cooperation with female investors are also present. And not without reason. Only 16% of the 311,000 American financial advisers are female. The  Boston Consulting Group  estimates that in 2015 women owned 35% of the money invested in North America. This percentage is growing steadily due to the fact that women aged 16 to 34 are now more likely to be graduate and postgraduate and they live longer than men. Cerulli Associates, a market research firm has recently warned its clients in the financial sector about the risk that “unmarried spouses” would definitely move their money after a separation. Cerulli discovered that a woman whose financial consultant sent her mail to her almost divorced husband immediately dismissed him. “And all those tips on how to talk to female customers … are annoying me. It’s as if women were so powerless that they would not be able to do anything,” said Deborah Frazier – the only paid consultant in Chapel Hill, North Carolina, who manages the money of 80 clients – 100 million dollars. Half of her clients are widowed, divorced and unmarried women.

Gender differences are not fiction but proven in scientific and field studies.

 For example, women are more cautious about negative risks, less convinced about the efficiency of their investments and less willing to engage in active stock trading which reduces their investment return. In other words, women are born index fund investors. In addition, when assessing portfolio profitability “women instead of studying the market situation on a daily basis are more prone to reaching a specific goal,” said Sheila Sheffer, a consultant from Janney Montgomery Scott  Washington branch, who, as ranked by Forbes, is among the best financial advisors and manages $ 500 million. Also half of her clients are women.

As Frazier says, women need a different approach, both in the way you talk with them about investing and how you address them. While working in Wall Street Krawcheck rejected the special programs designed for female investors, as they seemed “arrogant” and “always revolved around male dominance … and Chardonnay.” Frazier says that she speaks the same to all her clients but and as all successful advisers do, she emphasizes the individual goals. She describes her approach as follows: “You are an individual. You have your own wishes. You need money that works for you. Let’s talk about the possible and also the impossible!”

This is also what Ellevest aspires to. The question is – whether Ellevest will be able to add value to the services to justify the 0.5% annual fee? Real-life advisers usually offer customers more than just asset placement and financial advice. Nevertheless, Krawcheck has a trusted advisor – the 39-year-old co-founder and president of Ellevest Charlie Kroll, who in 2000 created Andera a financial technology company in his dorm in Brown University and sold it for $ 48 million in 2014. Ellevest has attracted $ 19 million from Morningstar, Mohamed El-Erian, Aspect Ventures, Khosla Ventures, Melody Hobson, Nellie and Max Levchin, Venus Williams and many others; value of the company counts to about fifty million dollars.

Ellevest attracted Sylvia Kwan as the head funds manager. She holds a Ph.D. from Stanford University and has been managing the Financial Engines 401k (employer sponsored Pension Investment Plan) portfolio for ten years. Kwan says that the biggest differences in Ellevest’s recommendations are based on “gender pay gap”. Women with a Bachelor’s degree reach their salary peak when 40 and men – 55 years of age. Women then should start saving money relatively earlier and put off higher percentage of their salary. According to Vanguard’s annual reports on based on the plans it manages for both genders, the level of savings and distribution of assets is the same, especially in the 401k pension plan. But by the end of 2015 the average saving rate for women compared to men was only 65% – as a reflection of their lower incomes and career breaks.

In addition to  Ellevest  focuss on savings and portfolios specifically for women, the company has developed a rather attractive strategy. Retirement goals are depicted as future annual income rather than a one-time payment. The portfolio return is finely calculated to match the customer requirements, not the S&P 500 index. The strategy is sly, it does not reveal small details in order to avoid the clients feeling being talked into the deal.

In mid-March Ellevest had three thousand accounts with assets worth $ 18 million; the average amount in each account is about six thousand dollars. The average client is a 30-year-old woman taking part in a 401kretirement plan for which Ellevest will offer the best investment options for free. She has no credit card debt, but most likely holds a study loan.

Will it be a profitable business? It’s too early to say. However, no doubt that the financial sector is closely following it.