Last week we spoke about how investing has historically been restricted to those in a higher income bracket, assumed to be able to contribute more financially. This class restriction in the investment world has made it difficult for those under certain income brackets to invest confidently, or even seek the guidance of financial advisors for their investments.
Financial limitations are by no means the only barriers to investing funds - there is a gender divide as well. Former Wall Street executive Sallie Krawcheck noticed that female investors tended to shy away from uncertainty and high risk in the investment market, and on average invested less than their male counterparts. To counter this behavior and empower women to make their own informed investment decisions, she created Ellevest in 2016.
According to Krawcheck, women are less concerned with the potential of large payouts and more with maintaining the money they put into their investments. In fact, according to BlackRock, less than 30 percent of women put their money in high-risk investments which promise a good return, compared to just under 50 percent of men who invest in the same high-risk stocks.
Ellevest is a digital investment platform, tailored specifically to benefit female investors. It puts their money into low-cost ETFs which are based on personalized goals. Some of the goals Ellevest investors can choose from are starting a business, buying a home, having children, or saving for retirement. Just this year, the startup received funding from some of their first investors, Rethink Impact, a U.S. impact fund group which has a focus on gendered issues and tennis star, Venus Williams, who of course is also an advocate for equal pay and equal workforce opportunities for women.
Ellevest pays attention to how women's financial lives are affected by life events like longer lifespans, or differences in how men and women are paid on average. The affects of these life events aren't something that only Ellevest recognizes. In fact, similar startups with a gendered approach to investment have considered them as well. Even large investment firms, like BlackRock, acknowledge that American women will face difficulties saving for a comfortable retirement due to the gender gap in pay between men and women. Even though the gap is closing with the newest generation, it has grave affects on how women, who, on average, will live longer than their male counterparts, will be able to save for their twilight years.
Invest Like a Woman. Because Money is Power.
The setup process is simple. First, the user tells Ellevest about her goals. For instance, the user will indicate how much she wants to save, how long she wants it to take her to save and how much she can start off with and contribute each month. The example on the website shows a woman who wants to save $175,000 for a home down payment over the span of five years. She is able to start with $40,000 and can save an additional $2,000 each month. Based on that information alone, Ellevest can create and manage a custom portfolio of investments.
The investment technology Ellevest uses is cutting-edge with an optimized, user-friendly interface that can help minimizes taxes and fees, specialized risk management technology and extensive market research built in. The pricing of Ellevest has been simplified, so advanced and novice investors can use their tools for less than mainstream investment management systems charge. The user pays 0.50 percent of their assets under management, there is no minimum balance, no penalty for withdrawals, and they receive free investment plans and an emergency fund. How does the 0.50 percent work? Say, for instance, that Susan's account has $10,000 in assets. She will pay around $50 a year to use the platform. That amount is diminutive, especially compared compared with the 1.0 percent which Ellevest says is typically charged by traditional advisors.
The variables on Ellevest's platform are customizable. The timeline can be changed as can the recurring contribution, initial deposit and the target amount of each goal. Users can also experiment with the different budget options available to help them reach fiscal goals and their plans can be updated and changed at any time (including information about the goal date and the portfolio itself). The unfortunate truth is that factors outside of our own actions and control often alter our engagement with the financial sector. This can be gender, or even age. Sadly, positive change is often slow, and a long time coming. Efforts from startups like Ellevest or Wisebanyan, mentioned last week, are proof that if a way hasn't been provided, sometimes we have to carve one out ourselves.