2020 was a 'terrible year' for women: Krawcheck

Julia La Roche recently spoke with Ellevest CEO Sallie Krawcheck for Yahoo Finance Presents, presented by T. Rowe Price about how 2020 has affected investors, especially women.

Video Transcript

ALEXIS CHRISTOFOROUS: In the latest episode of "Yahoo Finance Presents," brought to you by T Rowe Price, Yahoo Finance's Julia La Roche sat down with Ellevest CEO Sallie Krawcheck to talk about the gender wealth gap and how women in particular have handled all the stock market volatility we've seen in 2020.

SALLIE KRAWCHECK: Well, it depends on where you started the year in 2020 and what your personal financial circumstances were. For women overall, it was a terrible year. For many women, it was a disastrous year. Women sit here today having lost, certainly, years of financial and economic progress, perhaps decades of financial and economic progress.

Women have lost their jobs at a disproportionate rate in comparison to men, because they're a bigger share of service workers. They're actually a bigger share of the frontline workers-- the nurses, et cetera. So they've risked their lives to a greater extent. For women who have been privileged enough to work from the home-- whereas the men in their lives have increased their productivity, some by a lot, women's productivity has been reduced, as the traditional gender roles have sort of been reinstituted.

And even promotions, Julia-- men have been getting promotions at multiple the rates of women. And so all of this has compounded for the typical woman that she's moved backwards. Now, if you're a woman who's been investing and are able to be in the markets, women, I would put forth, outperformed men this year, because women tended to just stay put, didn't trade around the volatility.

But what we saw at Ellevest is those who were able to kept investing through the tough times-- not trading, investing. And that means they've come out ahead.

JULIA LA ROCHE: So a couple of things to really break down there. It's been somewhat of a she session, I suppose, for women this year. And we know there are gender pay gaps, of course. We know there's going to be a retirement crisis specifically for women. And there's the gender wealth gap, something you and I have talked about.

Before we get into how women have outperformed, how do we bring more women along on the investing journey? What are some of the actionable steps that can be taken?

SALLIE KRAWCHECK: Well, and that's what we're all about at Ellevest. So the actionable steps that we took is we went out and raised venture capital money to build an investing platform specifically for women. What we found-- while most of us think, oh, investing is gender neutral, money's gender neutral, and Wall Street firms and investing firms, we serve everyone.

We said, wait a second, look at your client base. If they're 80%, 85%, 90% men, you're just saying you're serving everyone. You're not. And so we built Ellevest from the ground up around what will motivate women. Newsflash, it's not trading Bitcoin.

Newsflash, it's not trading in and out of stocks. It really is more goals-based, more holistic, more of setting a habit and let it run, more long term planning. And so that's what we're doing at Ellevest. Now, what I do worry about, Julia, is we dump so much of this on women-- here, read this book about female empowerment and getting ahead, and you go girl.

We really need to recognize that a country, that there are really systemic issues that hold women back. One of which is that gender pay gap really takes off when she has children, for a couple of reasons, one of which is a bias we all have of dads are so responsible, and moms aren't putting in all the attention at work. Which, you know, if she has to do all the housework, can be the case-- can be tough for her.

But also, we don't have a mandated paid for maternal leave in this country. And so trying to juggle those things at that very challenging part of life-- so let's not-- you know, we got to-- everybody's got to fight for themselves. We've got to build companies that serve needs. But let's not forget there are systemic issues that can only be solved really through policy action.

JULIA LA ROCHE: Yeah, I hear you on the systemic issues, absolutely, through policy action. Let's talk about the outperformance of women that you mentioned. That was really interesting how women are able to maintain that long term view, especially during the market volatility. Would love to kind of explore that further with you.

SALLIE KRAWCHECK: Yeah, I have several hypotheses around this, Julia, one of which is the flip side of what we talked about earlier that women have been doing more. And so when you've got three kids hanging on you, you know, you're on the Zoom with the boss, you can smell dinner burning, and your spouse is working out on the Peloton, you know, you're not trading, right? You're like, I am trying to keep my head above water.

And the research is clear that women have to outperform at work, underrepresented minorities have to outperform at work in order to get ahead. So part of me says, this is the flip side of having so much else. And the other part of me says that women-- the reason-- you can see it in the industry. Women just don't take as much joy from that trading-- from the, I traded this, I watch this on TV, I have this hot stock tip-- you know, that competitive, sort of almost athletic, you know, let's win versus lose.

Women are like, yeah, y'all do that. Can I retire on time? That's part of where I think the industry has been built for men-- where men have enjoyed that sort of the jousting that occurs in the markets. And women are like, yeah.

JULIA LA ROCHE: It's almost like a game. And it sounds like women are more risk aware-- it's not that they're risk averse, it sounds like they're just very aware as well.

SALLIE KRAWCHECK: I love you-- exactly. We have saddled women for so many years with that, oh, you're risk averse. And we said, well, tell me why you think that. And the industry says back to you, well, it's clear-- they're not investing as much as the men are, so therefore, they're risk averse.

And Ellevest was really the first that said, actually, maybe it's not that they don't want to invest, maybe they don't want to invest the way the industry has positioned it as a form of competition. Maybe if you can provide them with goals-based investing, as we do, you'll actually find they'll take on the risk in order to invest. It's the way the industry has presented itself which hasn't been as appealing.

JULIA LA ROCHE: Let's talk about the goals-based investing. And I do enjoy our conversations, because I always feel like I learn something new. So I'm a 32-year-old woman, recently married-- no kids yet. But what are kind of the goals that we should be setting along the way at different ages, different benchmarks in our life? And what do we need in terms of savings versus investments?

SALLIE KRAWCHECK: Yeah. Well, it really depends on where you are age wise and goal wise, and where you are financially. So for anybody who hasn't paid down their credit card debt, I don't really care if you want to invest or trade. Let's get that stuff paid off, because the chances that you're going to earn enough in investing after tax to pay off the credit card debt is-- you'd have to be Warren Buffett on complete steroids.

And so if you haven't done that, you got to do that. If you haven't built an emergency fund, I don't want you trading then either. And it's really that three to six months of take-home pay. Likewise, if you haven't been investing in your 401(k), particularly if your company has a match, I don't want you trading over here. I want you to be investing through that and get that free money that's a match and let the tax benefits work for you.

The key though, Julia-- and if you can, start early. Some of the worst financial advice I've ever heard has been, don't worry about it in your 20s, because you're going to make much more money in your 30s and 40s. And so therefore, you can start then, which shows a complete lack of understanding of the power of compounding. Which is time in the market where you earn a return and the return on the return and the famous Warren Buffett snowball, for most people is so much more valuable than trying to get the timing right. And that's why you sort of hear about older people having more money. You just put the money in and just leave it.

JULIA LA ROCHE: I like what you're saying about compounding. And once you start to see the results, you certainly get it-- and especially when you can start at an earlier age. You know, obviously, 2020 has been a year like we've never seen before-- starting to see those green shoots heading into 2021. Sally, what is kind of your moonshot for women and investing in the markets for 2021?

SALLIE KRAWCHECK: What do you mean by moonshot?

JULIA LA ROCHE: What do you want to see accomplished-- whether it's addressing some of the systemic issues that we've seen from a policy perspective, bringing in more women to investing. Any sort of goals now that we're getting through one heck of a year?

SALLIE KRAWCHECK: All of it. But you know, what I would go back to the core of is that somehow, we women got convinced-- probably when we were little girls-- that we weren't good at math. At the same time, they were telling us you're not going to coding, we're also sort of getting the message-- forget about math. You're not good at investing.

This is really for him to do. In case you're at all confused about it, the industry is overwhelmingly male. In case you're still further confused about it, the industry symbol is a bull. So we've got every message that this really isn't for you.

In fact, we sit here today, much as where we were a few decades ago, where it used to be if you were athletic, if you were competitive in sports as a woman, it was unladylike. There's almost some of that with money today-- that talking about money is unladylike and sort of tacky.

And so today when you say the word, money, to a man, what springs to mind for him is this sense of abundance-- power, strength, independence. And for a woman, it's scarcity, loneliness, uncertainty. And so we sort of shy away from it and leave it.

And so for 2021, while we're passing the law for the mandated paid parental leave, while women are investing more, of course with Ellevest, we hope, but if you must with someone else, then you must with someone else-- that we're also breaking through the taboos which hurt not just us, but our families and our children as well.

JULIA LA ROCHE: Well, I always appreciate that we can have this conversation and bring more women along as part of this bigger conversation. Sallie Krawcheck, the CEO of Ellevest, I thank you so much for joining me today.

SALLIE KRAWCHECK: Always happy to, Julia. Thank you.