Morningstar: Gender Diversity Key to Success, Says Krawcheck

Morningstar: Gender Diversity Key to Success, Says Krawcheck

The $14 trillion retirement gap in America “is so scary we’ve stopped talking about it,” Sallie Krawcheck said during a keynote presentation at the Morningstar Investment conference. “And the retirement crisis is a woman’s crisis.” They retire with less money than men and live longer.

It’s not the first time women have been ignored, particularly by financial services companies and financial advisors, said Krawcheck, the former head of wealth management at Merrill Lynch and current CEO of Ellevate, the professional network of women.

The statistics are well known, or should be by now to most advisors: Female-controlled wealth is growing at a faster clip than men; there will be more millionaire women than men in the U.S. in the not-to-distant future. Yet two-thirds are not happy with their financial advisor (compared to less than 10 percent of men) and 70 percent leave the advisor once the husband dies.

Consider that most men with over $250,000 in investable assets already have a financial advisor, and they are happy with them, so fighting over that saturated market is not a growth strategy, she said. “Ignore women and millennials only if you're willing to see your business stagnate and shrink.”

“The majority of wealth that women have today is not invested,” she said. It’s sitting in savings accounts. Why? Research from LPL found that women value wealth preservation seven times more than they value growth.

The language that advisors use does not resonate with women. Advisors should talk less about alpha and market performance, and focus on goals and risks. Women aren’t looking to beat the market, they want to know “if they can send their kids to college.”

“At Smith Barney, our largest product by far was our managed accounts. By far. We did a poll, and found 89 percent of our clients did not know what it was. The client would buy it, and the women would nod.”

On a larger level, Krawcheck thinks the senior ranks of management at financial firms should be more diverse. She said research has shown companies with diverse leadership in management outperform on a host of metrics, including sales and return on capital, because they don’t indulge in the “group think” that plagues leadership teams with similar backgrounds and experiences.

Krawcheck worked with Joe Keefe, the CEO of socially responsible fund company Pax World Management, to create the Pax Ellevate Global Women’s Index Fund, designed to invest in companies that have women in senior leadership roles, including on their board of directors. While the fund has trailed its benchmarks, investing with social impact is important to 70 percent of women, she said.

Pax World Management is a finalist in the asset management category of the Wealthmanagement.com Industry Achievement awards for its initiatives in creating an ESG fund and index focused on women-led companies.

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