Ellevest’s gender-aware investing experience

Repeat Customer podcast, season 2, episode 1

After conquering the male-dominated boardrooms of Wall Street, Sallie Krawcheck turned her attention to an underserved market worth at least $7 billion: women. But how do you transform a customer experience largely geared toward men, in a complex industry like investment banking?

Sallie reveals how she created a uniquely gender-aware digital platform called Ellevest, while Arielle O'Shea at NerdWallet describes its impact on the traditional banking industry.

Featured in this episode:

  • Sallie Krawcheck, CEO and Co-Founder of Ellevest
  • Arielle O'Shea, Senior Writer specializing in investing and retirement at NerdWallet
  • Mary Entwistle, small business owner and Ellevest fan

Repeat Customer is an original podcast from Zendesk about great customer experience.

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Transcript
[Realtor]
Welcome home, y’all; congratulations there’s the keys you’ve been waiting for, go ahead and go inside your beautiful new home.

[Alyssa]
Hey, Sallie. I am closing on a house next week.

[Mio Adilman]
Alyssa has just bought her first home in Athens, Georgia.

[Alyssa]
And as a freelancer, that is not something I thought I'd be able to do, so thanks a bunch.

[Mio Adilman]
It's a pretty big accomplishment for a single woman in her early-30s without a steady income.

[Alyssa]
Especially when you're dealing with not a lot of money, it can be really easy to get stuck in this mindset that's sort of like, "I don't have money. I'm not going to have money. Like, none of this applies to me."

[Mio Adilman]
So the first person Alyssa wants to thank isn't a supportive partner, or generous parent, or even a real estate agent, or mortgage broker. No, she wants to thank someone named Sallie.

[Sallie Krawcheck]
Hi, my name is Sallie Krawcheck, CEO and Co-Founder of Ellevest.

[Mio Adilman]
And what is Ellevest?

[Sallie Krawcheck]
We're an investing platform for women.

[Mio Adilman]
An investing platform for women?

[Sallie Krawcheck]
We all intuitively understand that money is power. Whether it's $200,000 she earns in her life or a million dollars, or $500,000, or whatever it is, that is live-the-life-you-want money. That is take-your-fucking-hand-off-my-leg money.

[Mio Adilman]
Welcome to Season 2 of Repeat Customer, an original podcast from Zendesk about great customer experiences, how companies create them, and why their super fans love them so much. My name is Mio Adilman, and Zendesk is a customer service and engagement platform. Repeat Customer 2.0 starts on Wall Street 2.0, in the growing world of FinTech and robo-advising.

[Sallie Krawcheck]
You call it robo-advising. I call it digital investing.

[Mio Adilman]
I mean digital investing, and in Ellevest's case, a completely unique digital investment experience, designed mainly for women. But why is a separate customer experience for women even necessary? Money's money, right? Your stocks, mutual funds, ETFs, whatever, they all rise and fall based on the market, not your gender.

[Arielle O'Shea]
For the most part, robo-advising refers to portfolio management by computer algorithm.

[Mio Adilman]
I know nothing about money, except that I'd like to have way more of it, so I found someone who spends her time researching and writing about robo-advisors and financial services.

[Arielle O'Shea]
Hi, my name is Arielle O'Shea. I'm the investing and retirement specialist at NerdWallet. Financial advisors have really long used software like this, or similar to this, to help manage the money for their clients, right? But robo-advisors were the first services that really brought that software directly to clients.

[Mio Adilman]
Ellevest launched in 2016 with a lot of buzz. For reasons we'll talk about in a moment, Sallie Krawcheck is a big deal on Wall Street. She quickly attracted high-profile investors, and the company's assets under management are growing fast. But it was Ellevest's woman-focused platform that got the most attention. There are so many customer experience lessons here we're going to get into, but let's start with Sallie's story, because her story, and the way women relate to it, is a central part of the overall Ellevest experience.

[Sallie Krawcheck]
The one point of stress was money.

[Mio Adilman]
Sallie grew up in Charleston, South Carolina. Her parents married young and quickly had a bunch of kids. For a while, cash was tight.

[Sallie Krawcheck]
The only thing I ever saw my parents fight about—the only thing—was money. It was scary for us as kids, so I had a very negative point of view towards money, as, "I better get some of it, because I don't want to be in these fights."

[Mio Adilman]
So maybe that's why years later, after getting a journalism degree from the University of North Carolina, Sallie decided a reporter's salary just wasn't going to cut it.

[Sallie Krawcheck]
Wall Street was paying 31, 32, $33,000 a year. What else do you need to know?

[Mio Adilman]
So she went to work as an investment banking analyst, then a research analyst, but that's where things got crazy.

[Sallie Krawcheck]
What met me every day, every other day, was a Xerox copy of male genitalia on my desk, and I would walk in, look at it, the guys would all be gathered around to see what the reaction would be. Hearing everybody laugh, I mean, just the deep humiliation driven by the sole fact that I was a woman was horrible.

[Mio Adilman]
This is a terrible story. It makes me totally cringe. At the same time, it raises a larger question. How could they provide a customer experience for women?

[Sallie Krawcheck]
Oh, they didn't. They didn't.

[Mio Adilman]
But how could they know their customer—

[Sallie Krawcheck]
They don't. This is the money industry; even today, at the senior levels, 86% of financial advisors are men. 90% of mutual fund managers are men. 90% of traders are men. 95% of hedge fund managers are men. How do they serve their female clients? Well, they don't. Their clients are overwhelmingly male.

[Mio Adilman]
This was the late '80s, early '90s, but it sounds like something out of the 1950s. A young Sallie Krawcheck had landed in the middle of an old boys' club, an exclusive old boys' club, but as hard as they tried, one woman they couldn't exclude was Sallie. Her research was solid, and if you haven't already noticed, Sallie's pretty direct. She was hard to ignore. She ended up running divisions at a bunch of big companies, like Citigroup and Merrill Lynch, leading huge teams of brokers, analysts, and wealth management advisors. OK, so you get the best of these guys, right?

[Sallie Krawcheck]
I never thought of it like that.

[Mio Adilman]
"I mean, good luck with the Xerox guys. I'm going to run Citi."

[Sallie Krawcheck]
Funny what happens when you actually put your head down and work, as opposed to coming to the office and harass people.

[Mio Adilman]
But—

[Sallie Krawcheck]
Yes?

[Mio Adilman]
In those positions, you're leading large teams of investment advisors. Did you think about female customers at that time?

[Sallie Krawcheck]
Oh, of course, but it's extremely hard to change a culture. Now, the question is why would I have? You know, revenues for the business I was running was $17-1/2 billion. Bottom line was $2-1/2 billion, so you're going to take a business that's that successful and try to completely change it to something that might not be successful. P.S., the thing you would have had to start with would have been changing the brand symbol, which is a bull, because there's no way you're getting a large female clientele with a bull. So why would you? You wouldn't. No smart business person would.

[Mio Adilman]
A smart businessperson might not, but here's what you stand to lose, or rather, not gain by making that decision. Depending on who you talk to, female investors represent a 7 to $11 trillion market, and much of that still untapped.

[Sallie Krawcheck]
That's a different issue. So, now you're saying, "Why aren't banks going after the women's market?" And the answer is, I think all of them have. They just haven't been successful. Our solution, as an industry, has been to change her. Let's give them more financial education. And as I like to say, what's more interesting than financial education? The answer's everything, right? So the industry solution is, "Change yourself, lady. Here's a book. Come on back," and she never does. So at Citi, we had something called Women & Co., which was an initiative around women, spent a fortune on it. It was a marketing initiative.

[Mio Adilman]
The term for this in business is called pink-washing. Take a product and experience traditionally geared to men, slap some female-friendly marketing language on it, and expect women to magically connect with it. It didn't work, but Wall Street was making mad money, so you know—how big a problem could it be? But then something unexpected happened to all that money.

[Speaker 5]
It was the worst day on Wall Street since the crash of 1987.

[Speaker 6]
It's at 676 points down.

[Speaker 7]
Traders here working the phones say a lot of their customers are freaked out, waiting to see—

[Mio Adilman]
In 2008, Wall Street was rocked by the subprime meltdown, and the country went into a recession.

[Sallie Krawcheck]
So I really began to think deeply about what caused this crisis, and everybody talked about leverage and greed, but what nobody talked about was there was just too much groupthink. Think back, we talked earlier, 90% of traders are men, overwhelmingly white men. Homogenous groups over-trust each other, right? Ah, there's also research that says that poor risk-taking correlates with testosterone levels. There's research that shows that homogenous groups, in this case white gentlemen, show off for each other, right? And there's not a person listening to this podcast who believes that if the trading floors of Wall Street were 50% female, 50% male, 40, 45% people of color, that the financial crisis would have been worse.

[Mio Adilman]
This lack of diversity had also created a really narrow customer experience that didn't appeal to not just women, but people of other backgrounds and socioeconomic brackets. And Wall Street was now worse off for it. It's at this point, according to Arielle O'Shea at NerdWallet, that the industry started to undergo a bit of a disruption. Enter, robo-advisor.

[Arielle O'Shea]
The first services to launch were launched around 2008, and then they really broadly launched in 2010. A service called Betterment is largely believed to be the first robo-advisor that really attracted a lot of consumers and investments, and what they did was really make it easier for consumers to access investment advice. So up until this point, you had to pay a human advisor if you wanted advice.

[Mio Adilman]
Typically, 2.5% on every dollar invested. That adds up. Betterment dropped their fee to just a quarter of 1%.

[Arielle O'Shea]
And the other barrier to entry was that you needed, in most cases, around $250,000 or more to obtain the advice from a human, because below that amount, it wasn't really worth their time. The fees just weren't high enough. So, what robo-advisors really did was change the landscape so that the average consumer can get financial advice for very cheap and for very little money in terms of a minimum investment. I mean, often you can open an account with $1.

[Mio Adilman]
This was possible because the algorithms could advise thousands, even millions of clients at once, which didn't just make it easier for investors battered by the recession to stay in the game. It opened the doors to a whole new demographic that might never have invested at all, at first, a younger, more tech-savvy millennial crowd, but also a more diverse crowd, who found it simpler dealing with an algorithm than that exclusive old boys' network.

[Arielle O'Shea]
I think they were all aiming to be gender-neutral, which is not necessarily the best approach for women, because of these unique issues that women face. They really, in some cases, may benefit from an advisor who is specifically talking to women, specifically taking into account the barriers that they face to accumulating enough money.

[Mio Adilman]
This is important, because as we'll hear later, the barrier to a positive customer experience wasn't just a bunch of dismissive male financial advisors. There were some other key things female investors needed but weren't getting, which is probably why after she left Merrill Lynch and while looking for the next thing to do, Sallie started getting a bunch of similar-sounding suggestions.

[Sallie Krawcheck]
A number of folks said, "Sallie, you should start an investment platform for women," and I was ... "That is so offensive. Investing platform for women. Women don't ... We don't need our own thing. What do you think, we're ..." and here's where I was socialized and all came in, "That's so junior varsity. You don't think we can keep up with the guys? That's ridiculous." So my ego got in the way, and it took me a while before sort of had this “a-ha” moment.

[Mio Adilman]
In just a second, Sallie Krawcheck's a-ha moment results in a radical new customer experience for millions of investors, and potential investors. But first, if you're as obsessed about great customer experience as I am, new episodes of Repeat Customer post every two weeks, and you can learn more about the podcast at zendesk.com/repeatcustomer, or you can let me know how you feel about this podcast experience by leaving a review. Please? It gets a little lonely in this recording booth built for one, so it'd be great to hear from you. And if you're a CX professional looking to elevate your company's customer service game, check out zendesk.com, because the best customer experiences are built on Zendesk. OK, end of plug. Let's go.

Around 2011, 2012, between jobs, Sallie Krawcheck started researching the idea of an investment service directly aimed at women. She was skeptical at first, but then found some compelling data.

[Sallie Krawcheck]
Hold on, let me get these numbers right. 2/3 of women under the age of 40 do not have a financial advisor. Of those that do, 2/3 are unhappy with them. They rank the industry 33 out of 33 of the industries that serve them. When women with their spouse have a financial advisor, and their spouse tends to die first if you're in a heterosexual relationship. The women live six to eight years longer than the men. In the year after her spouse's death, the woman leaves that financial advisor at a rate of 80 to 90%, "Because he never spoke to me for all these years, because when I asked questions, I didn't get the answer, because they had an option strategy that I never understood." Media then plays back to us, tells us as women that we are dumb with money. Oh, you got to be freaking kidding me. And PS, the way parents talk to their kids about money, they tend to talk to their sons about growing wealth and making money, and they tend to talk to their daughters about saving money.

[Mio Adilman]
Sallie also discovered the financial reality for the average woman, and it had to do with her longer lifespan.

[Sallie Krawcheck]
The retirement savings crisis in this country is a female crisis. 80% of women die single. If there's not enough money, you guys are dead, right? You're fine. Well, how do you solve this? Wait a minute, women don't invest as much as men do. It costs a woman making $85,000 a year a million dollars over the course of her life.

[Mio Adilman]
By not investing?

[Sallie Krawcheck]
By not investing as much as the men do.

[Mio Adilman]
And why aren't they investing, or why weren't they investing?

[Sallie Krawcheck]
If you leave here and you take all this podcasting equipment, and you head on over to a Morgan Stanley or a Merrill Lynch office, they will tell you with confidence that women are too risk-averse, and you're nodding, because we've all heard it. "Oh yeah, that makes sense, and women need more financial education." You know, there's a lot of reasons, all of which are the women's fault, none of which is introspective as to, "Huh, maybe she's not risk-averse. Maybe she doesn't want to take on risk she doesn't understand."

[Mio Adilman]
It's not exactly a risk I understand either, though.

[Sallie Krawcheck]
That's exactly right. Men don't have more financial education than women, maybe by a few points. The gender difference, on average, is that men will invest anyway.

[Mio Adilman]
Sallie found a bunch of stuff ignored by other financial institutions, traditional or digital, things that could make for a better customer experience for female investors.

[Sallie Krawcheck]
My first thought was, "Well, I'm not an entrepreneur. That's not what I do."

[Mio Adilman]
But she did have incredible connections, other CEOs at other banking and investing firms, so she pitched the idea to them. By this point, Sallie was a big name on Wall Street, a name you couldn't ignore.

[Sallie Krawcheck]
You know, here's the under-investing, and it's not that they don't have money. Look, it's $7 trillion of investable assets, and we're going to inherit 60% of the $40 trillion wealth transfers, and 90% of us manage our money on our own at some point in our lives, and blah blah blah blah blah blah. I will never forget this guy who was like, "That is so interesting, Sallie." Then he looks off in the distance for an uncomfortably long period of time, and obviously, that's what big brains do when they are thinking, and he turns back to me and he says, "But don't their husbands manage their money for them?" I laughed.

[Mio Adilman]
OK, she laughed, but what now?

[Sallie Krawcheck]
I don't even know that I can solve this problem. It may be unsolvable, to get women interested in investing, but if I don't do it, shame on me.

[Mio Adilman]
After winning a personal battle against a room full of sexist guys at that old analyst job, Sallie was going to take on Wall Street again, but this time, it was a fight for thousands of female investors, a chance for them to make some of that live the life you want money, that take your hand off my leg money, that money is power money. So, in 2016, Ellevest launched with a customer experience never seen before on Wall Street. You create an account like any other site, with an email address and password. You then tell them a bit about yourself, you know, age, education, career, salary, how much money you have, pretty standard stuff so far, but then you're asked to choose from some life goals.

[Sallie Krawcheck]
So what they were getting before is the opportunity to earn more money, and to earn more money by winning at the game of investing. Ellevest is completely different. It is not a game. The end goal is achieving your financial goals, whatever they are. One we think of often, a very happy, badass, fantastic retirement, buying a home, having a baby, starting a business, a trip around the world. That's what motivates women to invest, not, "I bought this CTF versus this mutual fund."

[Mio Adilman]
Ellevest isn't the only company that has clients choose life goals, but their goals are structured around women's lives. Same for the advice that's included with those options. That info helps you choose target amounts for each goal, and timelines for reaching them. Then the algorithm crunches your data and tells you how much to throw into each goal bucket. It also gives you a realistic, percentage-based breakdown of the achievability of your goals, taking into account different market scenarios.

[Mary Entwistle]
My business is called Hint of Mint Designs, and it's a hand-lettering and design company that I run with my younger sister.

[Mio Adilman]
Mary Elizabeth Entwistle works in fundraising at Sallie's alma mater, the University of North Carolina, but she also operates a small business.

[Mary Entwistle]
I don't know if this would be a formal business per se, it would have just continued to be a hobby, but having resources like Ellevest, and seeing other strong women in business, has helped us grow from a place where we were just doing this for fun.

[Mio Adilman]
I was kind of surprised by the amount of women who have these side hustles, but apparently that's pretty common.

[Sallie Krawcheck]
We use a very powerful algorithm, the only one that's gender aware.

[Mio Adilman]
And this is how a gender-aware customer experience works.

[Mary Entwistle]
The really interesting thing they do is that they take into account the fact that women will live longer, so they need their retirement savings to last longer, and typically won't see as much of a salary growth as their male counterparts will. And they take that into consideration when making their calculations for planning for retirement, which I don't think any other platform does.

[Mio Adilman]
Arielle O'Shea from NerdWallet pointed out some other cool features.

[Arielle O'Shea]
They are doing things for women that are specifically helpful. So, they take into account that women's salaries peak earlier than men, so they recommend a higher savings rate in general early on.

[Mio Adilman]
The average woman's earning potential maxes out in her 40s, while a man's does in his 60s. Besides suggesting more savings to allow for the gender wage gap, Ellevest also tackles it head-on.

[Arielle O'Shea]
They offer this career counseling, with their premium service, so this is the first robo-advisor that I've ever seen who is actually taking steps to help their clients earn more money at work, not just invest their money. So they're really maximizing their potential, which I think is really important, especially for women, when our salaries are often 80% of what men earn.

[Mio Adilman]
Financial disparity, the established, well-documented financial disparity and occasional instability that women deal with, like taking time away to have children, is baked into the Ellevest algorithm.

[Arielle O'Shea]
The one other thing that I really appreciate about Ellevest is that they have an emergency fund goal, which is basically a cash allocation, and they don't charge their management fee on that goal.

[Mio Adilman]
Ellevest has also discovered that women are more likely to go for something called impact investing, portfolios that are socially conscious.

[Arielle O'Shea]
And what Ellevest does is orient their impact portfolios around causes that support women.

[Mio Adilman]
And throughout this whole experience, the language in the interface are simple and understandable.

[Arielle O'Shea]
So most robo-advisors will, to some extent, help you plan for goals, but what Ellevest does is really allow you to identify specific goals, and then help show you what sort of trade-offs you might need to make to meet those goals.

[Sallie Krawcheck]
We send her an email, "Susie, you're off track. In order to get back on track to take the trip around the world, you need to deposit another $100, you need to up your recurring deposit by X amount, or you need to take your trip six months later." And she can think about how much more approachable and graspable that is than, "Your portfolio's down 3%." Like what do I do with that? What does that mean? Ellevest is the only one, you can still retire on time. OK.

[Mio Adilman]
So back to my original question. Why is a woman-focused investing platform necessary? I think we answered that by studying Ellevest's customer experience, lessons we'll recap in a moment. Before that, though, what about the future of robo-advising? What happens when all of those investment accounts grow, and people's financial needs spread into other areas?

[Arielle O'Shea]
What we've seen over the last couple years is that robo-advisors have been adding more services so that they can be more of a holistic, one-stop shop for consumers.

[Mio Adilman]
This may include things like bank accounts, portfolio lines of credit, insurance.

[Arielle O'Shea]
The complexity in your financial situation goes up the more money that you have in a lot of cases, and what that means is that a sort of one-size-fits-all or one-size-fits-most computer algorithm may not meet your needs, but a human advisor could really take a look at your situation and offer you holistic advice.

[Mio Adilman]
So, human advisors are now being offered by most robo-advisors.

[Sallie Krawcheck]
I think there's a false argument that the FinTech, and the banking, and the investing industry love to have about technology versus people. There is no financial advisor out there who's not using technology today, and there's no technology firm that's not using people today. Within Ellevest, we've got a digital offering, that has a very light human interface if you want it.

[Mio Adilman]
Growing up in South Carolina, Sallie started worrying about money at a very young age. Then she moved to New York and conquered Wall Street, and now she's helping other women get some of that money, and hopefully some peace of mind. Is it possible to stop worrying about money?

[Sallie Krawcheck]
My opinion doesn't matter. It's what the research tells us. And the research tells us that even wealthy women have bag lady syndrome. Again, we've been socialized in a way that women who make hundreds of thousands, even millions of dollars, their number one worry is they're going to die penniless.

[Mio Adilman]
But I'm guessing if you have to worry, it's better the worry about money with at least some of it stocked away in the bank, right? The customer experience at Ellevest holds many lessons for other financial institutions, and even other industries, like I don't know, don't ignore half of the population, consider the specific needs of large demographics, don't talk over their heads, don't try to change them to suit your business, hire a diverse workforce that a majority of customers can identify with, and establish an authentic relationship between your customers and a kickass founder or CEO. Like, how many heads of banks or investment firms do you really ever get to know and want to hang with?

[Mary Entwistle]
Oh my gosh. This is so overwhelming—I love Sallie. I would say thank you for everything that you have done to invest in women and encourage other women to invest in women.

[Mio Adilman]
What's amazing is by overlooking the needs of women, both traditional and startup investment companies were leaving trillions of dollars on the table. By offering a unique customer experience, Ellevest and its clients are gaining a nice slice of that pie. In the next episode of Repeat Customer, we're going to look at something that at scale could save trillions of dollars for the U.S. economy. A bunch of medical startups are disrupting the healthcare system by optimizing the patient's customer experience. Have you ever even considered yourself a customer deserving of a pleasant experience in a doctor's office? Well, that's coming up next time. Thanks for listening.