Motley Fool Hidden Gems Investing - Yes, Women Make Better Investors Than Men

Episode Date: May 29, 2022

Women have different challenges in investing, including a wage gap and longer life expectancies. We’ve got two conversations addressing some of those challenges. (1:09) Deidre Woollard talks with Sallie Krawcheck, co-founder and CEO of Ellevest (a bank and robo-advisor specifically designed for women) about how she’s helping more women invest and a lesser-known savings tool for investors who want to give back. (18:39) Dana Corl Kasarda talks with Kathryn Tuggle, co-author of the new book “How to Money”, about some of the positive ways that stereotypes are changing for women and investing. Hosts: Deidre Woollard, Dana Corl Kasarda Guests: Sallie Krawcheck, Kathryn Tuggle Producer: Ricky Mulvey Engineers: Dan Boyd, Brandon Gentry, Spencer Daniel Learn more about your ad choices. Visit megaphone.fm/adchoices

OK, when you get on a Zoom call with a guy, how many of them have a kid hanging off their neck? How many women do? And he's like, you're right. You know, you've always got the woman with the toddler and the kid and the cat screaming in the background and the parent, you know, can you come get me this? So what we found when we went back into the home is some of the old gender roles not only stayed, but were in fact reinforced. I'm Chris Hill, and that's Sally Krawcheck, the CEO and co-founder of LVEST, a bank and robo-advisor designed specifically for women. Women have different challenges in investing, including a wage gap and a longer life expectancy. Today, we've got a couple of conversations addressing some of those challenges. First, Deidre Woollard talked with Sally Krawcheck

about the funding challenges for female entrepreneurs, how women invest differently than men, and a lesser-known savings tool for investors who want to give back. Welcome, Sally. Thank you. Good to be here. Well, I was excited to see that you recently raised a $53 million Series B funding round, and you had mentioned that two-thirds of your investors were female, which I thought was fantastic. What are you seeing in the landscape for female VC investing? Yeah. And actually 90% of investors in this round were underrepresented investors. So women, people of color, women of color, LGBTQIA. So we're really excited that the work we're doing

to help women invest is actually extending to women investing in Ellevest. What I'm seeing is a lot more money and women coming in at the seed and series A level. I'm seeing that women entrepreneurs outperform male entrepreneurs in crowdfunding. And unfortunately, I'm seeing a series B cliff when it comes to women CEOs raising larger amounts of money. That I think it's in part because you don't have as many women writing those big checks. And so you just run into a little bit of a wall when you get to the bigger dollars. Despite the fact, by the way, that the research tells you that women-run businesses perform as well, there's research that says better than men-run businesses, startups. Do you find that the type of business

in women entrepreneurs matters? It seems to me that the bigger funding rounds I see seem to be very women-centric businesses, whereas other ones, maybe not so much. I was literally having this conversation three minutes ago, that there is research, you know it intuitively, and there's research that says that there's businesses that are more traditionally female-based, female-oriented, or ones that tend to get funded. put another way, if you look at the number of fintech businesses, LFS being one of them, that have raised more than call it $100 million in total funding, I think it's five. Whereas there are dozens and dozens run by men. And so, you know, it's how we're socialized. When we think of startup CEOs, we think young man. And, you know, where we can sort of shift that to being women are things like, yeah, of course they understand sort of clothing, makeup, et cetera. And I applaud

them. I applaud those women. They're doing tremendous things. I also hope that we can expand out the types of entrepreneurs that we're funding. Absolutely. Yes. Well, let's talk a little bit about socially responsible investing and doing well by doing good. I've invested for a long time. I'm starting to think about this more in my portfolio, but also struggling with that idea of balancing returns and ESG concerns. How do you wrestle with that? I think you should leave that worry behind. The idea that you, by definition, must give up return in order to invest in companies that are advancing women, companies that have strong governance, companies that are doing good things for the environment. Why is it that those things should

cause a decrease in return? Why should it be the companies that are not diverse that have better returns? In fact, the research tells us it's the exact opposite. And it was true years ago when ESG investing was new, when it was all about not investing in X or Y company. But, you know, we've moved forward from that and the business, there's much more data around it. It's been professionalized. And look, I would actually say to you, you're investing for impact today. You are. You just don't know it. One of the things that we're seeing, I think, is that companies are spending more time at least talking about ESG issues. Are you concerned in some cases that you're seeing a little bit of like greenwashing and things like that?

Yeah. But, you know, and I'm concerned that people talk about diversity more than they do it, too. And, you know, I'm concerned about all that. But what we can't do is wait for perfection in order to take action. Right. We you know, we should we'll get more and more information over time. Right. That, you know, is technology advances is more businesses are formed about this. will be able, you know, there are more data sources now than they ever were when I first got involved in gender lens investing with the PAX Elevate Global Women's Leadership Fund. At the very beginning, we're actually literally counting women, right? How many women are in the leadership team? Let's look at the annual report. Is Alex, what do we think? What are we thinking

in here? Robin, what are we thinking here? And now there are many more data sources. So sunlight is the best disinfectant. All of that will start to become clearer. There'll be more information. It'll be right on our phones. We'll be able to see it. It'll take us to where we want to buy from, take us to what we want to invest in. But of course, people are going to exaggerate in the meantime, and such is life. Well, at least the exaggeration at least means that there's focus on it and potential to change over time, which I think, or at least going in the right direction, I like to think. Well, I hope so, you know, because we need business to help us change the world, that particularly in the United States where, you know, our government

is certainly not, you know, providing, say, for example, the social safety net that we need and could use. Companies are having to step up and where the government is not perhaps taking as much action on the environment as we would like for companies to step up. So I sure as hell hope that companies are taking it seriously and stepping up because we really are not able to completely depend on government. Very true. You tweeted something recently that I thought was interesting, kind of connects to this idea, which is to stay involved with your money. And I think this is hard for people, especially for women. Sometimes we're great at the earning part, but the investing part, we feel a little less confident on. How do we shift that?

Yeah. Well, the reason we feel less confident is we have a lifetime of being told that we should be less confident. That articles written to men around money, 72% of them are positive and about expansion and growth and it's all abundance. And so when men think about money, they tend to automatically go to power, strength, independence. For women, 90% of articles are about scrimping and saving and how hard it is and how challenging it is and don't buy the latte and don't have the facial and you buy too many shoes and you're so flibbergigity. And so women, and by the way, rather than like, oh, there's a systemic issue, it's called the gender pay gap. This is actually literally not your fault. Instead, it's like, oh man, if I just wouldn't drink the latte,

I would be able to like retire. So there's a lifetime of that. And it's all about scarcity. And so of course, women there feel loneliness. They feel isolation. They feel uncertainty. No wonder we're no, no. Let's combine that with the fact that we are told as little girls that we need to be pretty close to perfect. You know, you sit in class and the guys are running around, the little boys are running around, the girls are having to sit like that and don't get your dress dirty. And girls, when they don't get A's, you know, oh no, no. And so we are pushed towards perfectionism. At the same time, we're being told that we're no good with money. Why would we want to invest? Why wouldn't we want to keep it in the savings account? And of course,

the reason is because it cost us hundreds of thousands for some millions over the course of their lives. And our industry's response has been marketing campaigns to women. It's really only Ellevest that stepped in and said, let us change the underlying product for some of those in the intro, some of the realities for women that we have to invest differently because we earn less. We take more career breaks. We live longer. We have to take those things into account in investing that if we just think it's average, we could fall short. Absolutely. One of the other things that I've heard a lot, which I'd like to explore with you, which is the idea that women are risk averse. So we've seen, we hear this all the time. Women don't like risk. Women aren't

going to take risks. We're seeing it right now in, in cryptocurrency. Some of the, some of the surveys that are coming out are saying, you know, women, women are kind of missing out on crypto. What are you thinking about, about women? Missed out on a big decline. Yeah, right. Right about now. So look, what, what that actually does is there's a simplifying assumption. there. That we, the industry, what we're offering is chef's kiss. And the fact that you women are not investing means that it is your fault and you're risk averse.

What I would argue is that there's a difference here that may feel a little subtle, but it's important. Women are risk aware. We want to understand the risk that we're taking. And By that, it's, how much could this go down? If I invest, historically, what would my types of returns have been? How bad could it have gotten? Again, that's why Ellevest changed the underlying product to address that. Ellevest was the first that said, maybe it's not them. Maybe our industry, which is very majority men, built the business for themselves and didn't take into account some of these more subtle differences. And so once we, as we began to say, okay, you're risk aware, let us give you the information you need in English. Then we became

the, certainly the first investing firm built by women to get to the size that we have. So you've got stocks, ETFs, all of that. What are you thinking about crypto and what about other alternatives, things like crowdfunding and things like that? Crypto, I think, has to date small part to play in a diversified investment portfolio. That's not the way most folks are using it. Of course, today, most of there's more of a, some are investing a number of trading. We're again, not big traders regardless. So in crypto, you know, can provide shorter history, but provide some diversification. You know, when you get into alternatives like hedge funds, not as big a fan, right? You know, are the hedge fund managers that much better than the mutual

fund managers to be trading the same stocks and get better returns? The research tells us pretty much no. Where it gets, where it starts to get interesting are things like, you know, angel investing in women startup CEOs, where it is as, you know, forest management, which obviously can have such a positive impact, where it's investing, you know, in getting, you know, the sustainable housing. Those things to me and to our chief investment officer are just, not only do they provide diversification, they provide direct impact. And you just can feel great about, you know, you're able to, through LOS, see what that impact is. And so it goes from being theoretical to we rehoused X number of women, you know, in transition from say abuse relationships

into sustainable housing, that, that kind of like, to me, that's great investing. Are there, are those nonprofits, are there, are there tax benefits involved with those types of candy? Not nonprofits. These are investments. And so there are returns to be made as those houses are fixed up and at some point sold as, as rent comes in, et cetera. So again, you go back to, you know, you can get, you can earn a financial return while having a societal return as well. Those two things are not mutually exclusive. And also, you know, it all, all good doesn't have to be done through nonprofits. Um, and in particular, you know, for people who are giving their money away to nonprofits, we've had clients who realize they're giving their money because they want to

go this way, but their investments are going that way. And so, you know, their contributions, their nonprofit contributions, their investments can be working against each other as opposed to with each other. What do you think about donor advised funds and instruments like that? And that's right on target. You know, again, we love them and find so many people are investing, not thinking about how that money that's sitting there to be given away, how it can have an impact before it's ever given away. And so, they'll invest in, well, an S&P 500 or something as opposed to, you know, gosh, I'm really trying to find, you know, I'm really all about water equity and I want to give the money away for that. And in the meantime, I may be

investing in companies that are, again, the exact opposite. That sort of relates to another thing that I'm thinking a lot about lately, which is the aging of America, demographics. Seems like we keep hearing about the great wealth transfer, not something that's kind of happening yet, but is going to happen in the future. And I think that has a lot of impact for women. What advice do you have for people that are sort of stuck a little bit in that sandwich generation that so many of us find ourselves in trying to advise our parents and then trying to deal with those assets? Look, these, you know, these are very human, can be very difficult conversations where women so often get stuck providing the care for both the parents and for the children. And if none of us really were attuned to it, the pandemic sure made it clear. Although it's sort of interesting to me how some people don't see things. I was on a call a few months ago with a fellow I used to work with and talking about how the pandemic had set women back economically and financially. And he was like, and how women actually are getting less promotions at work now.

And he's like, what? I would have thought being at home would have been helpful. They could get more work done, blah, blah, blah, blah. I'm like, OK, when you get on a Zoom call with a guy, how many of them have a kid hanging off their neck? How many women do? and he's like you're right you know you've always got the woman with the toddler and the kid and the cat screaming in the background and the parent you know can you come get me this

so what we found when we went back into the home is some of the old gender roles not only stayed but were in fact reinforced or doubly reinforced and so as a result even those women who were privileged enough to work from the home during the pandemic just weren't getting the promotions and women of course lost jobs at disproportionate rates so on the one hand as the wealth transfer happens women are going to be beneficiaries again you know we live longer than men do so we will receive that money as our partners pass away we 80 of women die single um will be the beneficiaries unfortunately if we have outsourced management of the money to our partner you know 74 of women tend to have a negative surprise when the money comes to them

We'll get it. It won't be as much as we thought. We'll get some money from the parents. But there's a price that we've paid for that, which is that caregiver role that has sort of been the way of the world in our society for too long. 80% of women die single. That's an important underline there because that means that we all need to make sure that we understand our finances, that we don't outsource it to partners or really anybody else. No doubt. No doubt. And it's interesting. 80% of women die single when they do. 74% have a negative surprise. That's not half. It's not like, yeah, you know, and it's sort of 601 happened. 74%. So something is happening there. And I think the thing that's happening there is women have been socialized. You're not good with money and like, oh, thank God. Let me just leave it with him and I'll take care of this other stuff. And I'm

busy. But the other thing that's happening is he feels the pressure because society tells him that he is the breadwinner. He is the one who's supposed to be good with money. He is the one you know, who tends to be more overconfident on money. So he's not telling, he's carrying the burden alone. Think about that lonely moment. So she's left out, he's got the burden and neither ends up in a good spot. Next up is Catherine Tuggle. She's the editor-in-chief of the website HerMoney. She's the co-author of the brand new book, How to Money. Dana Coral Casarda talked with her about some of the positive ways that stereotypes around women in investing are changing. Can you tell us a little bit about your upbringing and how that

has shaped your relationship with money? It's a great question. I definitely don't have the typical upbringing with money that I think a lot of people in New York have. I am a mixed race woman from rural Alabama. I grew up selling vegetables on the side of the road with my grandfather. We were middle class, I would say, but saving money was everything. So I got a lot of education about saving money, zero education about investing money. But I am very thankful for for what I was taught from an early age, which is self-sufficiency and saving. And also in Alabama, you know, when I was a young adult there, I also taught yoga at Tutwiler prison in Alabama, which is a women's prison in Alabama. And I have to say that this experience

made a big impact on me and that it deepened my passion for, for really fighting for all women, especially marginalized women who are often intentionally excluded from pathways that would allow them to build wealth. So I think my upbringing overall has really made me very passionate about, about bringing, spreading the word to all women about what it means to come into your financial power and what it means to have an understanding of your money and where your money is going. The sentiment is really that women are taught to budget and men are taught to earn. What are your thoughts on that, that message that we've sent to, to young people starting in money and even before? Yeah. I mean, first of all, it's absolutely true. And this is the reason why

her money exists is because women invest on average 40% less than men, which is frankly dangerous. We live five years longer than men on average. The gender wage gap means we're earning about 83 cents for every dollar that a man earns. So we're faced with that quintessential problem of having to do more with less. So the narrative that young women are taught, which is to save in budget is great, right? Like we all need that. Those are the building blocks, but women also have to be educated on how to make their money last. Do you think any of that has been influenced by the pandemic? Have you seen any trends or changes in the past couple of years? It's a great question. And I've been pretty encouraged with the data that we've been seeing post-pandemic.

We're seeing that women are actually taking more control of their finances. And we just did some research on this, this month. It's a research done by Harmony and the Alliance for Lifetime Income. It's our state of women survey for 2022. Basically what we found is that women are breaking down stereotypes and taking control. 94% of women who are partnered said that they are engaged in managing their investments and they are engaged with their retirement planning. And previously, as we know, we had been seeing when women were taking a back seat on those bigger picture financial aspects of their life. So it's been great to see that changing and women getting more into the driver's seat. And I I've been thrilled with the positive reception that we've

gotten for our book, how to money, which was specifically written for young women. So just to see moms and aunts and grandmothers buying that for the young women in their lives has been so beautiful. In the time that Her Money has been around, has the way that they've spoken to women and given guidance changed? Yeah, we launched our podcast in 2016 and we launched our website in 2018. And since then, we've really seen a lot more companies, particularly Fortune 500 companies, pledging to end the gender wage gap and to have pay parity and to have pay transparency. And since that time, we've also had the pandemic, which was terrible for women. It took more women out of the workforce.

There's still 1.1 million women who have not reentered the workforce post-COVID. But I also think that the conversation is changing around workplace flexibility. I think more places are allowing remote work flexibility, flexible working hours. More companies have awakened to the need that women often have with child care. So I do think we will come out of the last few years with more options for working than women have ever had available before. That's great. Very positive.

I love the idea of, you know, women growing in that space. Studies have shown that women make better investors. What are your thoughts on that? I think my favorite studies have shown that women are less likely to see the stock market as a game to be played than men. And we're more likely to want to be investors for the long haul. We want to play the long game. We are generally better at taking a 360 degree view of our entire financial picture to really

see what's going on and to see that road ahead. And to your point earlier, we're better savers. You know, being risk averse can be a negative thing if it prevents us from getting started on our investing journey, if it prevents us from ever opening a brokerage account in the first place. But the right amount of risk aversion can also be a really good thing if it inspires us to think decades into the future and to play that long game for our retirement. So it's graduation time. We just saw Taylor Swift give the NYU commencement address.

If you were to give the commencement address today, what would you be telling new grads? It's hard to think of things that haven't already been said that don't sound trite, just because I'm feeling so optimistic about the current hiring market. I'm feeling really optimistic about our interns that we've had at Hermione from the past few years. They're so bright. They're so much better than I was at that age. They are, they are so with it. They are so together. They are so organized. Um, and they're showing up to work fully and completely and wholly themselves. So I would say, don't let anybody diminish your light. Don't let anybody tell you that you should be doing something else or that you should think about doing something that you

don't like to make more money. I was able to build a career doing what I love, which is writing. And I believe that people should boldly go in the direction of their dreams. Like I said, it's a great time to get hired right now. Put yourself out there, give us a clever cover letter, and I will definitely have you in for an interview, but I'm feeling really good about the prospects for this graduating class. Oh, that's so like heartwarming. I feel like I just Thank you so much, Catherine. This has been so wonderful. Thank you for sharing. I can't wait to continue to recommend How to Money. It's been a pleasure talking to you today. Thank you so much, Dana. This was great. That's all for today. Remember the stock

market is closed for the Memorial Day holiday, so we'll see you on Tuesday. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill, thanks for listening. We'll see you on Tuesday.