Ellevest, the automated investment start-up helping women retire rich using ‘robo advice’
Sallie Krawcheck’s venture, launched a year ago, caters solely to the needs of female investors
Women’s careers are different from men’s, and their retirement planning should be, too, is Sallie Krawcheck’s pitch.
Ms Krawcheck, who made her name at Citigroup and Bank of America as one of the top women on Wall Street, has now closed a hefty new round of funding for her start-up robo-adviser, Ellevest.
Founded just over a year ago, Ellevest is an online investing platform that offers exchange-traded funds (ETFs) to help women save for retirement. That doesn’t mean the fund’s ETFs are somehow better suited to women, but that Ellevest tailors their portfolios to women’s needs.
For example, it uses salary curves geared to women, who usually see their highest pay at an earlier age than men and take more career breaks, which slow wage growth. With longer life spans, women have different risk profiles, too. Ellevest factors all this in so the portfolios it generates better estimate lifetime salaries and how much money its clients will need in retirement. To help them reach their goals, the firm aims for 90 per cent of annual income in savings before retirement, rather than the more typical 50 to 70 per cent. “Forecasting those things out is really important for retirement,” says Ms Krawcheck.
Automated advice platforms – known as robo advisers – are poised to expand their investments in ETFs over the next five years, boosting their assets to more than US$800 billion, according to a report by PwC. Overall, digital advice is likely to grow to $1 trillion by 2020, a separate study by Aite Group showed.
Robos, which include independents such as Betterment and Wealthfront, as well as platforms from the likes of Vanguard and Charles Schwab, currently oversee about $75bn.
The new, $34 million round of funding for Ellevest was led by Rethink Impact and included Salesforce Ventures and CreditEase Fintech Investment Fund. The tennis player Venus Williams and Egyptian and chief economic adviser of Allianz Mohamed El Erian have also backed the startup, which formally opened its doors the day before the 2016 election.
Ms Krawcheck, the chief executive and co-founder of Ellevest, was chief financial officer and head of global wealth management at Citigroup before heading wealth management for Bank of America. Even with her high-powered resume, it isn’t clear how scalable a digital money manager for women is.
Ms Krawcheck says she is confident she can keep up the pace but acknowleged that raising the money wasn’t easy.
Earlier this year she revealed the company had been fielding questions to get into the banking business, the credit card business, the student loan business.
The 52-year-old also outlined why it was important to have a company focused solely on the investment portfolios of women. While the robo-adviser is open to all potential customers it is directed at women. The firm offers wealth management services along with IRA transfers to customers who are largely women in their mid-30s.
“When we are talking about women’s equality, we think money should be part of the conversation because we feel quite strongly that women will not be equal with men until we’re financially equal,” Ms Krawcheck said, adding that while women continue to lag behind men in pay and promotions, investing deserves more attention in the gender equality discussion.
Career breaks for children in tandem with pay disparity makes it more likely women will not have enough saved for retirement, according to the startup.
“Women will not have the same degree of freedom in living their lives until they close these gaps that cost them possibly millions of dollars, and the main gap that no one was talking about until recently was gender investing,” said Ms Krawcheck.
Ellevest charges higher fees than some of the other robos, at 0.5 per cent of invested assets, which can help it become profitable with less money under management – but can also deter price-conscious customers who look to ETFs for low-cost investing. Ellevest has grown to just over $50 million in assets under management since launching in November.
When we are talking about women’s equality, we think money should be part of the conversation because we feel quite strongly that women will not be equal with men until we’re financially equal SALLIE KRAWCHECK CEO Ellevest