CLOSING THE GENDER INVESTING GAP - CFA …mmd.cfainstitute.org/pdf/transcripts/2016/krawcheck...Join Sallie Krawcheck, chair of Ellevate, a global professional woman’s network, as

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CLOSING THE GENDER INVESTING GAPSALLIE KRAWCHECKChair, Ellevate

2016 Alpha and Gender Diversity: The Competitive Edge14 September 2016Boston

Join Sallie Krawcheck, chair of Ellevate, a global professional woman’s network, as she explains why the gender investment gap exists and how gender, the investment gap, and retirement savings are all connected.

Frederic P. Lebel, CFA: Thank you, Leah. Thank you, Marg. First, a housekeeping item, I guess, as a man, to show my goodwill in trying to keep things in order.

I’ll be up, by the way, at 1:00 PM my time for your conference. Just, you’ll destroy my lunch, but that’s OK. I’m fine.

I’d like to take a moment to welcome to this audience, our audience from around the world through the CFA Institute website. You can in this room submit your cards that will be collected for the moderator. Regarding those that watch us through the Internet, you can join us virtually, and you can submit your questions through the chat feature of the broadcast website.

So with this housekeeping announcement, I’d like to make a few comments. When I first heard about this opportunity to present here, to be taking part and represent the Board of Governors, I was very, very pleased. And I understood it could be an opportunity for me to tell you about what the Board of Governors wants to do on the gender diversity and the gender element. And I thought I had like 10 minutes also to introduce our speaker Sallie Krawcheck.

But when I looked on the website, it was only five minutes. And now I see it’s five minutes that will take place between 5:12 to 5:15. So it’s going to be the shortest five minutes of my life, but that’s fine. I’m happy to do anything different.

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I would like to say a few words about three role models. And I’ve got three daughters, so I guess each and every one of them could be role models for one of each of my daughters. First Marg, then Leah, and of course say a few words about our speaker tonight.

Marg welcomed me on the board about six years ago. And I was impressed by Marg and impressed to this day about her ability to make a group of people that have all their various egos and interests work together and to be inclusive, incredibly inclusive, and incredibly effective at that.

I’d like to say a word about Leah because Leah, as you know, has been a driving force for this initia-tive. But that’s not her first success as an initiative. I’m not referring to the conference last year. I’m referring to the Global Research Challenge, which took place already 10 years ago. And she was at the very inception of that. I think Leah is an incredibly powerful achiever and creative at that.

Now, I’d like to tell you two words about what we do on the board in terms of diversity. We care about diversity. We care about diversity being geographical, being background, being age, but also diversity in gender.

And a gentleman actually, Bob Jenkins, came a couple of years ago and said we should have a tar-get. And the target is now at 30%. And like any other CFA charterholder, we like to outperform.

So there we are. This year, we’ll probably get to the 30%. Next cycle, Beth Hamilton-Keen being the past year’s chair of the nominations committee, and we’ll make sure that this target is achieved.

Why do we want a target like this? It’s not necessarily because we want to be in our times where most leaders are female but because we think it has value. And last weekend, we had a board retreat when we looked at our various profiles. And we could see and identify a couple of weak-nesses or points for amelioration that we have.

And definitely it happens that the gender issue is not an issue. It’s an opportunity. And I like Marg’s point on the ultimate diversifier. This is what should make our decision a better decision, and the board is fully behind it.

I’d like to say a few words to conclude on Sallie Krawcheck. When I asked about Sallie, I had somebody telling me, “Everybody knows and nobody knows Sallie,” which felt, what does that mean? And I was like, OK, maybe I should understand this myself.

So of course, I knew about Sallie, never met her. But I’m part of these people that know Sallie, and the question is why. So is it because she’s a female leader? Is it because she has an incredible career? Or is it because of something else?




And my starting point was to look on the Internet, like anybody else, and see that she’s been a track star in her youth. And then she went to UNC, where my brother lived — it must be a good place — and then got an MBA from Columbia, then became a leader of the industry. She started as a financial analyst, focused on Wall Street financials, and became chair and CEO of that firm, Sanford Bernstein. Then became CEO of a bank, and then CFO of another bank, and then CEO of an investment management and wealth division, and all these names are famous.

Now, that’s not the reason why we know Sallie, especially for those who haven’t met her. The reason why we know her is how she behaves throughout her career. And when she was an analyst, she was quoted as the last, I would say honest, I guess, is a quote, the last honest analyst on Wall Street.

Analyst independence was then a big feature. When she was in charge of the wealth management operation, one of the largest in the world, she fought for her clients. That created turmoil, I guess. So the reason why we know her is because of her courage. And not only because she’s female, not only because she was a CEO, but because courage is still an incredibly high in-demand commodity.

So my conclusion to this would be, with leaders like Leah, Marg, Sallie, we should ask ourselves what would we be missing if we didn’t have them. And what sort of role models they are for all of us, including girls, ladies, and men in this industry. Marg, incredible talent to get people together, to have them to work together, to trust each other. Leah, effective, creative; and Sallie, thank you for your courage, for your leadership, and please — the floor is yours.

[APPLAUSE]

Sallie Krawcheck: You want me to sit?

Margaret E. Franklin: No, you can —

Sallie Krawcheck: No, I’m doing, right?

Margaret E. Franklin: Yeah, you’re, it’s all yours.

Sallie Krawcheck: You’re just going to sit and watch my back.

Margaret E. Franklin: I’m just taking notes and getting some stuff here.

Sallie Krawcheck: You’re going to watch my back?

Margaret E. Franklin: I’ve got your back.

Sallie Krawcheck: I really appreciate that.




Margaret E. Franklin: I’ve got your back.

Sallie Krawcheck: But what was the — I missed the other part. You know me but you don’t know me. What is that? Because I’m so mysterious?

[LAUGHTER]

Sallie Krawcheck: Right? I’m a lady of mystery. Yeah, I sort of feel like my entire career has played out in front of the whole world. So I don’t know that there’s much to not know.

I’m so happy to be here with all of you this evening. Thank you so much for your very kind intro-duction. And thank you for inviting me and having me here.

I have so much to talk about. I have so much I want to share with all of you. I tell you, I was thinking today, being back in Boston is always a little evocative for me, is always maybe a little emotional for me.

And the reason being is that I spent my formative professional years as a sell-side equity research ana-lyst. You know, you just, if you wanted to be successful, you needed to come to Boston several times a year. And so you know, before we did the roller bags, I had the heavy bag over the shoulder with the high heels, making the way to sit in the anteroom at Fidelity, Wellington, MSRI, all the big guys, all the little guys, in order to try to be a successful equity sell-side research analyst some years ago.

And so it’s funny as we’re thinking about, talking about diversity, my mind casts back to those meetings that I had when I was here in Boston as a research analyst. And for those of you who know my background, for those of you who have been clients of mine, I was a research analyst at Sanford Bernstein. I don’t know if they still do it, but they did the big thick black books. That’s what we did with all of the analytics.

And particularly, I started covering life insurance, and then I covered the full financial services industry. I covered Wall Street. I worked to out-analyze anybody. You know, if it wasn’t quantifi-able, I tried not to say it.

My favorite piece of work is my multiple regression analysis in which I was able to tease out, to analyze the product line profitability of the investment banks. It’s still, still — I love that piece of work. I love that piece of work.

But I’ll tell you in each and every one of those meetings when I would come up here to visit the portfolio managers and the analysts, we’d go through all of the analysis. And in every meeting, without fail, there was always one question that was asked before I left. And that question was, “Is the management team any good? What do you think?”




And then, I would have to sort of put away my analysis. And I would say things like, “I think John Mack is good. I thought he sounded good on the conference call.”

Or, “Phil Purcell seems a little aloof to me.” Or, “Sandy Weill seems very aggressive.” I mean, I was 29. I was 30, 31, 32. These opinions that I had that were based on being on the same confer-ence calls that everyone else was one.

I always remember feeling deeply uncomfortable because my point of view of people is no better than anybody else’s. Case in point: my first husband; right, not a great choice. So I knew I wasn’t better at this than anyone else.

So leave that, let’s let that little new mom, little analyst, sit there for a second, stewing on the issue of how she can quantify the quality of management teams. Let’s then shoot into 2007, 2008; I’m running Smith Barney. I’ve been on a lot of management teams. I’ve seen some diverse ones. I’ve seen some non-diverse ones.

I have worked for more CEOs, financial services CEOs than anybody directly. I have been on more leadership teams than anybody. So I was gaining experience.

As mentioned, well, look, I do hold a couple world records. And I didn’t want to start off by brag-ging. I don’t want to intimidate the audience. But I am the only one who has been fired on the front page of the Wall Street Journal twice.

[LAUGHTER]

Thank you. And so after coming out of the crisis, after I worked to return client funds, and we did, that we had mis-sold as low risk but they were high risk, I had a little time on my hands. You know, I was sitting on the sofa. I was wearing the sweatpants. I was drinking the chardonnay, quite a bit of it, as a matter of fact, while the kids were at school.

And it had been years. I had been a manager. I had been a CFO. It had been years since I had been an analyst.

But I couldn’t help myself. Here we were coming out and through the worst financial crisis of any of our lifetimes. And having been in those roles in the companies, and having been an analyst covering the companies, it seemed to me that it was up to me, particularly when I was asked to spend time in the White House and spend time on the Hill, and I was being asked the question about the causes of the financial crisis, that I took some time and dug in and asked myself what did I see. What insight did I have that other people did not have?




Yeah, there was too much leverage, right. Yep, the loan-to-value ratio was too low. Yep, da ta da ta da. But it really was when I went to my son’s high school class. And they told me, as only teen-age boys can with the certainty of white males, that we in the industry had perfectly foreseen the financial crisis.

That we were evil geniuses. That we had foreseen it. That we knew it was coming. And therefore, we were to blame.

And by the way, that meant, and you see some of this in the policy changes since then. All you have to do is have a committee in place to foresee the crises. And I’m thinking to myself, we didn’t see it coming.

We thought there was a bubble, quite frankly — we did. But it was in China. And the idea around the subprime was, hey, the business is growing. The business is bigger than it’s ever been.

But you remember that whole idea about, but we’re parceling risk like we never could. We’re only keeping this much on the balance sheet. We’re parceling out risk to the hedge funds who can afford to take it. So we’re just better at risk.

And what I saw, and what I began to research, is that we believed it. The team believed that the world was different. And then I saw research that some subprime bankers had worse personal real estate performance than the average American.

And I remember being in those meetings with my colleagues, all middle-aged white males who went to the same schools, you know, were in the same training programs, who’d grown up together, who were on the same trading desks, whose spouses vacation together. And I remember all of that group agreeing this downturn wouldn’t be bad. I saw groupthink. I saw the false com-fort of agreement. Oh, we agree; so therefore, we must be right.

And so as I began to think about the causes of the crisis, something that I thought about that no one was talking about was groupthink. And so I began to dig, right? The research analyst in me reemerged, reawakened. And I began to dig.

And I saw the research that so many of you here know about, which is that the best teams, the smartest teams, the smartest collective teams are diverse teams: diversity of background; diversity of perspective; diversity of optimism, pessimism; diversity of education; diversity of skin color; diversity of gender; diversity of any kind. And in particular, because I’m a woman, I was most captivated by the research on diversity of gender. And what I saw is that companies that have more women in leadership roles, more-diverse teams, not all-women but more-diverse teams, have higher returns on equity not by a little but by a lot, have lower volatility, lower risk, greater client




engagement and focus, greater employee engagement. They could actually have a lower cost of funding, more innovation, more innovation.

And the moment for me, it was something like this, when Sylvia Hewlett — no, Catalyst, Ilene Lang at Catalyst was up on stage. And she was talking about some research they had done that showed that the power of gender diversity is so great. The gender-diverse teams outperform smarter and more-capable teams.

Now, as one who grew up at Bernstein, which worshipped the brain, that to me was the turning point. And so I think back to my research analyst self, who is sitting here trying to figure out how to quantify the quality of management, and the answer, the only answer I have found is gender diversity, is gender diversity. Now, I’m sorry to tell you that our industry, my industry has gone backwards — that rather than coming out of the crisis and becoming more diverse and recogniz-ing this, in fact, these large banks have become less diverse overall.

But tell me, is there any one — I mean, if you seriously, you may be sitting here. You’re a believer because you’re here. But seriously, even if you’re sort of, “Well, I had to be here. I’m just here. I don’t want to be here.”

And you think about all your colleagues: Is there really anybody who believes that the financial crisis that we went through would have been worse if we’d had more women? Hell, no, right? Think about those trading floors. If those had been half men and half women, do you really think it would have been worse?

And I’m not going to tell you about all the research that’s been ignored about when guys get together and show off for each other. There is research. There’s actually research that shows trad-ers, their testosterone, their risk-taking goes up and down with their testosterone. Who’s the emo-tional one now? That’s what I want to know.

And their bad risk-taking goes up and down with their testosterone. Anyway, look, I love guys. I love middle-aged white guys. I’ve been married to a couple of them; I think they’re amazing. But this diversity stuff is important.

So that’s how I came to a few things. As some of you may be aware, I bought the old 85 Broads, now Ellevate Network, the professional woman’s network. And the reason I did that is because networking has been called the number one unwritten rule of success in business.

And in our 30s, when the guys start to move ahead of us, it’s often because they have better con-nections. We’re doing what we do as women. We’re getting our A, we’re doing what our boss says, we’re getting our A. Our head is down.




And we don’t know that two departments over, they’re looking for someone to promote, right? Or we don’t know that there is a board position that’s open. Or we don’t know that there’s a great project, because our heads are down.

So Ellevate Network, which helps women advance. The other one that we were here talking about today is the Pax Ellevate Global Women’s Index Fund, which we launched a couple years ago, which invests in the top-rated companies for advancing women. I just think, so look — I was not in favor of values-based investing, impact investing, whatever you want to call it. I never know the right words to say around this stuff.

But I just thought, you invest for a higher return, and you give your money away later. And I have completely changed my mind. Because I believe that our money is real power and that I want to invest my values.

And my values are, in part, about advancing professional women, because so much good happens when that happens. And so we started the Pax Ellevate Global Women’s Index Fund a couple of years ago. I do remember, I was saying earlier today, the night before it launched, I woke up at 3:00 AM with a pit in my stomach and thought — hey.

Margaret E. Franklin: You’ve got questions.

Sallie Krawcheck: I’ve got questions. OK, I didn’t know if that was a “tell her to get off the stage.”

Margaret E. Franklin: Nope, you’re good.

Sallie Krawcheck: I woke up the night before, and I thought, oh my gosh, what if we underper-form and I ruin it for women everywhere. And in fact, I will tell you, a day and a half later, I did have a call from a reporter asking me how the first day and a half ’s performance had been. That actually happened.

But I am glad to tell you that two years in, the companies we invest in — global companies, have about one-third of their boards are women, about 25% of their management teams are women, ver-sus let’s call it 14%, 15% on average — is outperforming by quite a bit. And so I believe investing our values and investing in things we care about, that money is power. I’ll tell you the third thing.

So I had another insight. This one actually did not involve sitting on a sofa and drinking chardon-nay. This involved mascara.

I was putting my mascara on one morning. And you know, you’re my minders, right? And so I’m putting my mascara on, and you got to separate the lashes, right? You need to let the coat dry.




And all of a sudden, as though this bolt of lightning came through the window, it hit me that the retirement savings crisis is a woman’s crisis. Huh, I thought, huh, well, let’s think about that, right? Because this crisis, which is so big, $13 trillion in size and so ugly, the solutions for which are so bad, tax increases and entitlement cuts, is a woman’s crisis.

That’s because — over to the next eye — we women live five, six, eight years longer than men, depending on what research study you look at. Ninety percent of us on our own and managing our own money at some point in our lives. And we retire with two-thirds the money of men.

We retire with two-thirds the money of men because of the gender pay gap, because we take time off of work, and because of — oh, here’s the title of my speech — the gender investing gap. The gender investing gap means that we don’t invest nearly to the same extent that men do. And what’s interesting, although it sort of makes you uncomfortable to think about the retirement sav-ings crisis as a woman’s crisis, but guys, walk through any nursing home in the country. It’s 80% to 85% female, right?

We love guys. Do we have any? Sir, we love you, but you will be dead. And we will be dealing with this if there is not enough money.

And so here is the amazing thing. All the solutions go from negative to positive, right? So here’s a solution: Close the gender pay gap. That closes the retirement savings gap by one-third and grows the economy.

How about mandated parental leave? We’re the only developed country in the world that doesn’t have it. Do you know there’s research that shows it saves company money in the first year, first year?

Because if you’re allowed to heal after you have a baby, and you can get that baby on the right track, guess what — you’re more likely to come back to work. And your company is less likely to have to pay to replace you and train the person. And the third, the gender investing gap, women don’t invest to the same extent that men do. And that can close the gap, as well, and drive capital to markets, earn us more money, help our families.

So all of a sudden, the solutions go from negative to positive. And so my third business, the one that I’m working on right now, is Ellevest, a digital investment platform. For those of you who are not going to be in this room at 7:00 AM tomorrow morning listening to your presentation, Sara — I’ll be on CNBC, the travel gods willing, at 7:45 AM with an announcement about Ellevest; stay tuned.

But Ellevest is a digital investment platform for women. And I founded it because I love our busi-ness. I love our industry. But we do a better job for men than for women.




And it’s probably no coincidence that the businesses that I ran and I was in are 85% male. Somebody was telling me today 88% male. And that we have war analogies, sports analogies, beat the market, outperform, pick a winner, that CNBC is ESPN.

And the symbol of our industry, the symbol of the investing industry, is a bull. Yes, it’s a phallic symbol. It is male. The business comes across as male.

And as a result, we hear women say, I’m not as comfortable. Do you know the numbers? A gentle-man leaves his financial advisor, if neither one of them die, in any given year at a rate of less than 2%.

A woman leaves that same financial advisor in the year after her husband’s death at a rate of greater than 70%. That’s a 2%, right? Yeah, the guy leaves at less than 2%, the woman greater than 70%.

And the woman reports, “It just doesn’t fit me. They don’t talk to me. He talks to my husband. When I ask questions, I feel like I’m not being given the time. I don’t get the jargon. It just doesn’t feel — I don’t know what an option straddle strategy is. It just doesn’t feel right to me.”

And I will tell you one of the things I’m spending some time on is, we also, it’s this last place that we accept gender myths any longer. You know, that people sort of tell us we’re not as good at the guys at X, Y, and Z, you say no way, absolutely not. But think about it.

“Guys are better at math.” Actually, that’s not true. Girls get as good or better grades at math than the guys. But that, think about in our industry, that view, that myth permeates.

“Guys are better investors than women are” — not true. The research is clear. There are not enough women investors, but the women tend to be as good or better investors, depending on the research study, at the hedge fund manager level, the mutual fund manager level, and the individual inves-tor level.

“Women are too risk averse to invest.” No, women are more risk aware. And they want to know more about risk. And indeed, not standard deviation but how much money could I possibly lose?

“Women need a personal relationship and hand-holding.” No, women actually think today they need hand-holding because the industry is so full of jargon, they think they need someone to explain it.

And then here’s the one that’s tough to fight because it sounds right. “Women need more financial education.” And we buy that. We women buy that all day long. But the truth is, men need more financial education, too. Everybody needs more financial education. But the men invest through it, and the women don’t.




Now, this feels a little sad. But it’s actually tragic because it costs women, on average, tens of thou-sands, hundreds of thousands, millions of dollars over the course of their career. For some, it’s a bigger deal than the gender pay gap. Let me give you some numbers.

If you are a woman and you’re making $80 — hello, again — you’re making $85,000 a year, and you’re doing what the experts say, you are saving. You are saving 20%, and you are putting it in the bank, OK. Well, the first thing you do. You’re making your $85,000.

So you go and get your raise to the level of a man’s. You have earned over the course of your career another $1.1 million. That’s a pretty big deal.

But let’s say, instead you took the money that you’ve been putting aside and you begin to invest it. And you’re in a diversified portfolio. You’re not earning crazy returns. But that money starts to compound over 40 years. You get another not $1.1 million.

But depending on my Monte Carlo simulation, another $1.5 to $2.5 to $3 million. It’s life-changing. So many women, you hear, I’m going to wait. I’m going to do it, but I’m going to wait. Well, that same woman putting aside that same money waits for 10 years, it happens all the time, costs her $100 a day.

So these numbers are really significant. And I’m going to go all Gloria Steinem on you right now. Because what I would say is, investing is the best career advice women are not getting today.

Because you tell me, do you feel better going into your boss and saying, “Look, I don’t want to work on this project anymore. I want this interesting project.” Or, “I want this overseas assign-ment.” Or, “I want this promotion.”

Are you more comfortable with more money in the bank or less money in the bank? Are you more comfortable leaving a bad relationship with more money in the bank or less money in the bank? Are you even more comfortable asking for the raise if you have a cushion or not? These are life-changing.

And to go Gloria Steinem on you, to my view, we’ve come a very long way when it comes to feminism, a very long way. We will not complete the work of feminism until we are financially equal with men. It is only then that we can stand on our own two feet and no longer have to be empowered.

By the way, I’m over the word “empowerment.” I was saying earlier today, I never really liked it. I don’t know why. We used to put it in the Pax Ellevate brochures. And I’d take it out. Can we use something else? And then, I finally thought about two weeks ago to look up what it meant.




You know what it means? It means to be given power. Empowerment, to be given power — no wonder I don’t like it.

Because I have to tell you I’ve been waiting to be given power for a long time. I started in this industry in 1987. My analyst class was one-third women. I made it to the top. I got knocked off.

I made it to the top again. I got knocked off. I was pretty much all alone.

The analyst training class last year, about one-third women. This is what waiting to be empowered can do for us. When I got to visit with Gloria Steinem — I did, I’m bragging — I got to go to her apartment. It was amazing. It was amazing, OK.

Margaret E. Franklin: Girl crush.

Sallie Krawcheck: Oh my god, girl crush, huge girl crush, it was amazing. She had macramé everywhere. It was like I stepped into 1974. Ah, ah, and I did, I was saying earlier, I got the opportunity.

I said, “Whatever happened to your glasses?” She said, “No one ever asked me that before.” How is that the case? And she said she sat on them and she was never able to replace them. I sort of feel like Warby Parker would make her some.

But anyways, as we were sitting there, somehow this conversation came up. And she said, “You know, why do people really think anybody wants to give up power? Nobody gives up power. You have to have power. You have to take power.”

And so what I feel pretty excited about, so this is me. This is actually kind of me. That’s sort of my body on this ladder, on this book.

I’ve started to put together these thoughts in Own It, which is coming out in January. But the idea here is that we women today, we don’t have as much money as the guys, right? We’re not finan-cially equal with them yet.

But you know how much we have? We control $5 trillion of investable assets. We jointly control with our spouses another $6 trillion. We’re going to inherit 70% of the $40 trillion of wealth transfer over the next few decades.

We control 80% to 85% of household spending. We are half of employees. And the business world is actually shifting in a way that’s coming to us.




The idea of the old command and control, only I have the information, so I will husband it and I will direct you, has gone the way of the dodo bird. Today, everybody has the data and the infor-mation. And the strength comes from being able to analyze it, put together relationships, figure out the relationships, communicate with people, encourage people — all things we’re great at.

On top of that, technology is bringing down the cost of starting businesses and giving us alterna-tive career paths, such as freelancing. And so as I look at this, I think the world’s coming our way. I really do, not by being empowered, but by recognizing the power that we have and how the world is changing. And so my part in this, my little part in this, is to have a network that helps women come together, share ideas, move ahead, by having the Pax Ellevate Global Women’s Index Fund to drive capital to businesses that advance women, and by having Ellevest, a digital investment platform that can help women invest, and so that we can all build our power. Thank you.

Margaret E. Franklin: I think I’m enormously jealous that you’ve actually been to Gloria Steinem’s apartment.

Sallie Krawcheck: Oh my gosh, you should be.

Margaret E. Franklin: I had breakfast with her. And we all had to check and see how old she is, because she is just killing it at 80.

Sallie Krawcheck: Killing it, killing it.

Margaret E. Franklin: But it’s interesting because when she talks — and as you know, she has a real passion that pivots off rights of women and sort of taking power. But she sees that as a gener-ous act for all those who are excluded. And so why is it that gender diversity is the universal diver-sity issue? And in this business, one that is one of meritocracy, one that we can see the numbers, and in fact at this point, the client base is changing — why is it that it is so pervasive, that you and I find ourselves here mad?

Sallie Krawcheck: I know, still talk. Well, and the other thing that you and I were talking about earlier, another thing Gloria Steinem said, which really gave me a moment, is that women are the only group who become more radical as they age. And I’m like, yeah, and part of it, and as only Gloria could, she said it’s because we start out in our 20s thinking this is our mother’s issue. You know, this is our mother’s issue.

We’re two by two, the guys like having me around. And it’s only your 30s, you’re OK. And it’s when you’re later, and you’re our age, and you say, how am I the only one who’s one of a few who’s left?




Now, of course, the way Gloria says it, and I would never say it, is she says because the men want you around when you’re at your sexual peak. And as you get older, you know, you’re not a kitten. You’re a cat, and it’s not so fun anymore. That’s her words, not mine.

But look, I do think — well, I’ll tell you what I saw. And I’m not — I hope I don’t come off as angry. I hope I come off as determined and forceful and impassioned. I’m actually not angry.

I loved everyone I worked with. I loved the teams I worked with. What I saw was not a bunch of guys saying, we need to keep them out. Let’s keep this for ourselves. We just don’t want people with different body parts or different skin color.

What I heard again and again was not that. What I heard was, we would love to have a woman in that role. We would love to have a Latino in that role. But I need somebody I can trust. And this got even worse after the financial crisis, with the idea of, I would love to do it, but we don’t have the luxury of diversity.

And the person that they can trust always was someone who looked like themselves. And that happens to me. When you and I, we don’t know each other. We connected this morning like that, like that. Because we’re both of a certain age, with a certain background, and immediately —

Margaret E. Franklin: I’d hire you.

Sallie Krawcheck: I’d hire you in a second.

Margaret E. Franklin: I would hire you.

Sallie Krawcheck: In a second. You know what I’d hire even more? If you were a bottle blonde and if you were a southerner, then I’d be like, you’re perfect. Oh my god, you’re perfect. You’re perfect.

I mean, you know, because you would be me. And so I would be able to imagine — again, think about it, it’s not I’m trying to do it. But if I use my head for a second, I think, “This is a really hard job. I don’t know how Jim will do it. I don’t know how Jamal will do it. I know how Sallie would do it. OK, I can trust her.” And that’s what happens.

All the research about, oh, the business would be better if we had people of difference — that’s out the window. That’s theoretical. And by the way, I used to have a diverse person, and they were sort of hard to manage because I had to work harder to understand them, and this is just better.

Margaret E. Franklin: Yeah. So just on that, because now we’re seven years, almost eight, after the financial crisis, there’s been lots of discussion. We would make two observations. We talked about the numbers not changing.




But we also talked about the numbers declining. And I’ll tell you where we’ve really put a lot of effort into this, and we’re very alarmed, is on younger women. So you know, “greed is good,” Gordon Gekko. Now we have Wolf of Wall Street. And so we actually see women saying, “This isn’t good work.”

Sallie Krawcheck: Me, too.

Margaret E. Franklin: So what’s the one thing, make it two, that we could do as women in lead-ership and as an industry to attract the right type of people, which include younger women, and get back to restoring trust? Because we’re eight years and a bull market.

Sallie Krawcheck: Oh, it’s close to 10. I mean, think about it. The crisis started where I was sitting in 2007. You know, it caught the national eye really in 2008, but it’s amazing. It’s been a while.

Margaret E. Franklin: Yeah.

Sallie Krawcheck: And it feels like sort of yesterday, because it was so traumatic. Look, one thing we kind of have going for us is that women, and millennials in particular, look not only for com-pensation and they want to have an engaging job; they’re looking for meaning and purpose. And if we could just stop as a broader industry these crises, then we could actually begin to tell our story about how this industry, more than any others, helps families live the lives they want to do.

I mean, it’s a tremendous — no other industry has as much meaning and purpose and impact as we do. We just have gotten in our — not we in this room, but the industry has gotten in its own way. I think that’s number one.

I think, two, telling some stories. You know, the issue is, for so many years, we have allowed the press to tell our story for us. And so there’ve been some easy stories to tell. Again, there was the crisis, and there’s this Bernie Madoff over here.

And the press loves to tell these stories. And I can tell you with me, I can’t tell you how many women — my stepdaughter was one of them. I remember at one point I said to her, “Would you want to go into Wall Street, or even into business?” And she said, “Not after the way I’ve seen the press treat you, Sallie.”

Margaret E. Franklin: Yeah.

Sallie Krawcheck: And what she saw — so we all know this, right; you’ve seen the research that says likability and success are positively correlated in men. Like, I mean, who doesn’t want to hang out with Jamie Dimon, right? Wow, that would be amazing. And likability and success are inversely correlated in women.




And pick your favorite senior woman of whatever time, and we all have this impression of, she’s a bitch. And I mean, she must be to make it that, to be that senior in business, to make it that far — she’s got to be. And when I was in the press, when I was successful, when I was CFO at Citigroup, everybody hated me.

And then I got fired, and everybody loved me. And then I got, you know — it was the damned-est thing. And my kids watched it and said, “You’re the same person every single day. And they’re beating the living daylights out of you.”

And so what I hear from women when I go to business school is, “Now, exactly why would I want to be Erin Callan or Zoe Cruz, like, that’s the thing I’m going for? I don’t think so.” And so somehow we need to tell our own stories and put a positive light on these things about what interesting careers these are, how much of an impact you could have, how fun they can be.

Margaret E. Franklin: So you said, you know, and you’ve been very candid about your experi-ence, I just want to dig a little bit into that. Because I think all women at the top are surprised that there are so few of us. But you get there and you reflect on the 25, 30 years you’ve been.

And you sit there and you realize, it’s just been a series of small vulnerabilities and nicks. And then all of a sudden, you say, “I’m out of here” for whatever reason. Yours was remarkably public. And so I’m intrigued by your ability to pick yourself up particularly after, and you said this morn-ing, Vikram fired every woman in the senior. So talk a little bit about that experience and how you do pick yourself up as well as the chameleon-like nature that most of us find ourselves in when you are in larger organizations.

Sallie Krawcheck: Yeah, so I grew up in Charleston, South Carolina. I was, my parents, my lovely wonderful, wonderful parents, gave me typing lessons so that I could prepare for my even-tual career as a secretary, as they called them at the time. And I had a guidance counselor who pulled me aside about my junior year, when I was, I mean, I really almost reached the pinnacle of high school success because I was dating the cool guy.

And she pulled me aside, and I was giggling. And I was a cheerleader and the whole thing. And as I remember it, she grabbed me by my arm.

And it was essentially, “What are you doing? Look at your SAT scores. You can go. You’ve got potential, kid.”

And I remember, “Wait, what do you … what, I can go.” And I got into the University of North Carolina, which I know sitting, I mean, I bought a coat. It was the first time on a plane when I went up there.




And I know for those of you in the room, you’re like, “Ah, whatever, state school, who cares.” It was a big deal for me to go there. And then when I graduated, my father, of course, forbid me to move to New York. So I said, “I’m moving to New York.”

And I got a job at Salomon Brothers. And the next thing I know, you know, I’m a research analyst and I’m in Boston and I’m talking to portfolio managers. And then all of a sudden, I’m the direc-tor of research.

And then I’m on the cover of friggin’ Fortune magazine. And I’m running Smith Barney, and I’m running Merrill Lynch. I just cannot believe it.

And yeah, you know, I got all the stories in the world, right? You know, I was there. We were, some of us earlier today, I think I blocked this out, but I remember one day leaning over a desk, working on a math problem with a guy. And I turn around, there’s a guy pretending to perform a sex act on me behind me. So I had all of it, all of it. But the truth is, I’m like, “Dude, you’re just like a weird pervert; get out of my way.”

I first said, they’re not going to run me out. Because this is a game for me, right? And I’m playing on house money, because I could be back typing in Charleston, South Carolina. I’m playing with house money, so I’m going to go.

And even when I got fired, even when I got fired, there are two things you can say. You can either — the being on the front page of the Wall Street Journal is sort of freeing, right? Because you know, honey, do you think anybody read the Journal today — like, everybody knows, right? And so you can have that point of view.

Or it could be like, “Hot damn, I’m on the front page of the friggin’ Wall Street Journal!” — like, that anything I would do would merit being on the front page of the Wall Street Journal is frigging amazing. And when you have that point of view, and we’re fortunate to have it, you’ve got dinner on your table. I’ve got dinner on my table.

My children, thank goodness, are healthy. My marriage is strong. I’m playing with house money at this stage. And the fact that there are these inequities and inequalities is not fair.

I have been able to build a platform in my career in which I can fight for y’all now. I mean, that’s a really amazing thing. So to me, it’s been, yeah, there’s this nick and this cut, and it’s not fair and it’s not right.

But the truth is, we were not born in a slum in India, right? We all had parents that supported us. We all have made our way, and we’re playing with house money.




Margaret E. Franklin: You made a very compelling thesis for your digital platform for investing, which is really sort of the very changing, quickly changing nature of the client base. So talk about the competition. Do you feel like you’re completely alone in this?

Sallie Krawcheck: Yeah, I do, I do. We compete with everybody and we compete with nobody. You know, the people say to me, why would you want to — so we’re very female-first, right?

We are talking about the cost of career gaps. And we’re talking right to, we call her Ellen. I’ve had so many people say, “Well, why would you want to do this and cut out half the population?”

And I said, “Well, the industry in many ways has been talking to men for so long. They’ve already cut out half the population. We’re just talking to the other half.”

And we’re doing things and it’s not, “Oh, look at us, we’re girls.” But it’s doing things like in our financial plans, taking into account our longer lives, using technology to model that, taking into account through our proprietary algorithm that women’s salaries peak sooner than men. I mean, these are really important things that if you don’t take into account, you run out of money.

Taking into account that we women tend to be more risk aware than men, so targeting to get her to her goals or better in 70% of markets. So it’s not just, hey, we put a pink bow on it. And now, we’re going to talk about don’t buy the shoes, invest in the stock market. But four patents-pending proprietary algorithm that takes into account real needs for women.

Now by the way, gentlemen, in case you’re like, “Hey, I really like that,” we do allow you as you go through it, you can select “I’m a guy.” So you can say, I’m John. I’m a 35-year-old man. And then as we prepare your financial and investing plan, we kill you sooner and we have you earn more. So you actually achieve your goals much faster, which I don’t know if it’s funny or not.

Margaret E. Franklin: Somebody asked, is the gender investment gap a question of culture, edu-cation, or something else? And it was actually asked about the investor. But I’d ask, do you think we need to change the way we teach investment?

Sallie Krawcheck: Well, we don’t. We don’t. My son graduated from high school and now has graduated from college; he went to school in New York City. He had no personal finance educa-tion at all.

Instead, he did take a class on woodworking. So my New York City kid can now whittle wood, because you know how often that’s happening in New York, right — but nothing on personal finance. So I don’t think we need to change how we teach it. I just think we need to teach it.

And then the other part, what was it? What was the rest of the question? Was it culture?




Margaret E. Franklin: It was culture, education.

Sallie Krawcheck: Look, I think we need to stop trying to tell women to change. So what I think the industry does today is, here’s our set of offerings. And they are not changing, and the large-cap value, small-cap growth ETF, we got this alternative investment. We have this bond ladder portfolio, you know.

If you’re a digital advisor, we’ve got this tax loss harvesting initiative, all this stuff, right? And the industry really has questioned, they know they don’t have as much business from women. It doesn’t help that we call women a niche market, which the industry continues to do.

And then we pose the problem to ourselves: How do I market this to them? How do I market this to them? And what we’re trying to say is not how do we market to them — how do we better serve them. And what we found very quickly is there’s not a woman on the planet who wants to spend time, besides us in the room, of course, choosing between that large-cap value mutual fund and trying to figure out the difference between a small-cap growth ETF.

And so it’s us as an industry that I think needs to change. Because what we’ve been doing so far is trying to get the woman to change to us. And we haven’t been successful, and we’re doing her an enormous disservice.

Margaret E. Franklin: So do you think when you get to that point of here’s how we’re going take care of it, here’s how we’re going to reframe the question, do you think that that also applies to men? You know, I think about my institutional days when I’d do a portfolio review. And with the portfolio manager, you’d have the CFO, the CEO, investment guy, and they’d all be nodding.

And I’d think, I have my CFA. I have 10 years of experience. I’m having trouble following this portfolio manager keeping up. And they’re all like this. Then you’d say, what this means for you is this. And they’d be like, it just really unleashed stuff. So I don’t think it’s exclusive.

Sallie Krawcheck: No, look, none of us like to say we don’t understand. And again, that was a problem going into the crisis. I don’t know if any of you watched the JP Morgan whale issue when Senator Levin held the hearings.

And sometimes when I do speeches, and I’ll take the speech with me, I will read the words that were used in the deck for the Jamie Dimon direct reports, some of the smartest people any of us know. The words that they approved for the trade, and I can’t even go to do a straddle this, option that, short this, long that. And these words were read in front of the Senate to the people who approved the trade. And I didn’t understand.




I mean, I was a CFO, right. I ran wealth management groups. I didn’t understand them. And Senator Levin said, you know, “What do these words mean?” And nobody could answer it.

Nobody could answer it. And it was, at one time, going to be an $8 billion loss. And so you know, I think it’s hard for us, if we’re supposed to know something, to raise your hand and say, “I don’t understand.”

But that, guys, is part of the power of diversity. I will never ever forget sitting in a meeting at Citigroup in which the head of trading was describing a CDO-squared. And all the guys who were all in trading are all uh huh, uh huh. And Marge Magner, who is a woman, who ran the consumer business, said “What is that and why does it make sense for clients?” And then, there was a hubbub that occurred.

And because she was diverse and because she had standing, she had permission to ask that question. I mean, can you imagine if the number two guy in trading had asked it, right? He would have been laughed out of the room. But that’s why diversity can be so terrific, because you get that permission to ask the question, whereas if you’re already supposed to know, you just sit there and nod.

Margaret E. Franklin: We’re down to our last question. This is a room full of very senior women, largely portfolio managers and women in leadership positions. If you could tell this audience one thing to do when they take away from your talk and think about what they can do to change it, what would it be?

Sallie Krawcheck: Yes, I’m so glad you asked that question. I talked a little bit about we are where we are. We have made progress. It’s progress that our grandmothers and mothers would be pretty proud of us for.

I mean, it only struck me a handful of weeks ago, I don’t know why I hadn’t thought of it. My mother didn’t finish college, right? And so if you think about that progression, it’s pretty amazing. If we do think about, over the course of the past, let’s call it a couple of decades, that progress is slow.

If we continue on the path that we’re continuing on, we will reach gender pay parity in, pick your study, 118 years. There are more CEOs named John of large companies than there are women. And so this progress will continue, but it will be incremental.

Everybody in this room has built professional credibility. Everybody in this room has some level of seniority. Everybody in this room has the right to be at the table. And what I’m really starting to think about is, what can each of us do?

So what I can do, I can write a book. Well, thank goodness, right, they came to me. They said, would you write it? I’m so grateful to have a platform to talk about these issues.




Each of us in this room can have what I call the courageous conversation, that conversation that is perhaps behind a closed door. That is, “Jim, I just want to let you know in that meeting, you might not have noticed, but you interrupted Susie five times and you never interrupted anyone else.” Stick and move.

The courageous conversation, this happened to me at Smith Barney when we were going through our managing director promotions. And we were talking about it today. There was a gentleman who we promoted because he was aggressive. He broke eggs, and he got things done. We made him a managing director.

There was a woman who we did not promote. We told her that we were recommending she get an executive coach because she was aggressive, she broke eggs, and she got stuff done but people didn’t really like her that much. I wish I could tell you I caught that, but it was one of the men in the room who caught that we had done that. That was a courageous conversation, right?

Another courageous conversation is promoting and saying good things about other women. There is depressing research out there that says that if I were to say something great about you, you should be on this board. I met this great woman. She should ba ba, da da da da da. I would actu-ally have my comments dismissed.

That’s what the research shows, because they’d be thinking, “They’re women; they’re in cahoots.” If a guy did it, his professional reputation would be enhanced. How do we solve that? The research is clear.

The way we solve that is through a courageous conversation, which is, “Hey, I’m going to say something great about my new colleague. I know the research says you will dismiss me because of it. I know it sounds a little wonky, but it works.”

There’s research that shows that when you bring up the research, it negates the negative. That was so entwined. That really turned back on itself, didn’t it? It’s very Maddow. It’s very Maddow.

But there’s research amongst politicians that if somebody, if a male makes a gender comment about a female, either negative or positive — she’s a bimbo or she has great legs — it reduces her standing. If she calls him on it and says that was a gender comment, his standing goes down and hers goes up above where it was. So that’s a courageous conversation.

And each of us can figure out where are those courageous conversations we’re comfortable having. Because if we’re not bringing it up, they are not.

So I’ll give you one last anecdote. I have probably interrupted more groups of men talking about more things than anybody I know over the years. Walk in the room, “Hi guys.” “Oh, hi Sallie.”




Never once, never once, never once have they said to me, “So funny you’re here. We were just talk-ing about the business impact of gender diversity and how it helps profitability.” Never happened.

So I know there’s all this lean in together. And we gotta bring the guys in, and di di. Yeah, all that, but the truth is, unless we’re doing the hard work, unless we’re having the courageous con-versations, unless we’re putting our money to work, right — unless we’re pulling other women along, unless we’re recommending each other, it’s going to be a long time, a long, long time before we get to gender parity.

Margaret E. Franklin: Great. Let me make a couple remarks. We did not get to all the questions. I’m going to give them to you. And for those of you who are in the audience and made some great questions, perhaps you’ll hear them referred to in CNBC or something like that.

You have remarkable pedigree. You have an analyst’s mind, which is always, the evidence matters. And you now have a million degrees of freedom.

So my parting words to you might be, outside of thank you very much for joining us today, is my advice to you would be to go and be our Gloria Steinem. Because that is really how we’re going to change it. So will you please join me in thanking Sallie very much?

Sallie Krawcheck: Thank you, thank you, thank you.

Documents

CLOSING THE GENDER INVESTING GAP - CFA …mmd.cfainstitute.org/pdf/transcripts/2016/krawcheck...Join Sallie Krawcheck, chair of Ellevate, a global professional woman’s network, as