Krawcheck: The Retirement Crisis Is a Gender Crisis, Too

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. The retirement crisis is, in many ways, a woman's retirement crisis. Joining me to discuss that topic is Sallie Krawcheck--she is CEO of Ellevate Network.

Sallie, thank you so much for being here.

Sallie Krawcheck: Christine, thank you for having me. I appreciate it.

Benz: You gave a terrific presentation today at the Morningstar Investment Conference where you talked about the challenges that are confronting women--why, in many cases, this retirement crisis is hitting women disproportionately. Let's run through some of those numbers because they're really quite stunning.

Krawcheck: I've known some of these numbers for a while, and it wasn't until several months ago that, all of a sudden, I said, "Oh my goodness, if women make--and they do--$0.77 or $0.78 on the dollar to a man, if women take more career breaks than men do, women then retire with two thirds of the money that a man does." That's a fact. Women live six to eight years longer than men do. There is a statistic floating around: 80% of men die married, and 80% of women die single. If you look at any nursing home, it's 75%, 80%, or 83% women. I was standing around one day and, all of a sudden, I realized that if we have a retirement-savings crisis in this country, it's a gender crisis, also.

The interesting thing about it, beyond just the insight itself, is that if you begin to view this as a gender crisis, then you begin to recognize that although the solutions we talk about today are all pretty unpalatable, actually some number of them becomes more palatable. It's about keeping women in the workforce longer and having women invest to a greater degree. Those are much more palatable than saying in 40 years there's a big wealth transfer that has to occur.

Benz: A big focus of yours has been the fact that you believe that the financial-services community is really underserving women--to the detriment [of that community] as well as to women's detriment. Let's discuss the ways in which you think the industry really isn't stepping up to this challenge for women.

Krawcheck: What I would say is that I'm a big fan of financial advisors, and the industry does a great job for broad segments of the population. In fact, in the businesses that I ran--Merrill Lynch Wealth Management, Smith Barney--the satisfaction rate of our gentlemen clients for their financial advisor was 90% or more. That was better than they felt about their doctors.

However, when he passes away first, which we indicate is what happens most often, the widow leaves their joint financial advisor over the next year 70% of the time. And often, she puts that money in the bank. And so what is clear is that the primary relationship is with the husband; the relationship is not with the wife.

And what do the women tell us? Well, they tell us, "We had this financial advisor for years, and he didn't pay attention to me or he didn't answer my questions. ... I don't understand the jargon. ... I don't understand the trading. ... He never took the time with me to answer those questions." And so, as we talk to women, what they're really looking for is that direct one-to-one engagement, really understanding the capabilities, and really helping her and them to reach their goals--not outperform some market index.

Benz: So, this is a two-way street. Advisors could do a better job. The industry could do a better job. But women could arguably do a better job and make smarter decisions about how they're managing their assets.

Krawcheck: Oh, Christine--let's not blame the victim here, OK? [Laughing.]

Benz: Let's talk about ways in which women could improve.

Krawcheck: For sure. So, there's any number of good financial advisors who are, as we say, meeting the women where they are. We, as an industry, can certainly do more work there. But as women, what should we do? The answer is we should invest. And disclosure is not particularly our friend here--mutual fund prospectuses are very long, and it's tough to [wade through all of the information].

So, we have to recognize that we're so used to being A-students--we're so used to knowing everything. And, yes, you've got to know the facts, but if you're waiting until you read through all these piles of data and know the answer to every last question, you're not going to invest. It's very difficult to do. So, going back to investing first principles of looking for high-quality investments, looking for investments where the cost is lower, talking to your friends about who they engage with and who they really like, and so on. It's really about going back to first principles.

But if you talk to many women, they say, "I just don't understand yet." If we wait until we understand everything, we're not going to do it.

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Benz: One other thing you alluded to is the fact that women, oftentimes, are more risk-averse than their male counterparts. How can women step it up and make sure that they're taking an appropriate amount of risk, especially if they're a younger investor? They need to have stocks, but they might be scared about getting out of their bank savings account.

Krawcheck: That's right. There is research that has shown that women value capital protection seven times as much as they value wealth creation. So, some might say they're more risk-averse, and others might say they're more risk-aware. I think the way to get comfortable with taking on more risk is to have a fulsome conversation with an advisor: "What are my risks here? In bad down markets before, what would have happened?" And each market downturn is different from the one before. But I had a friend say to me not long ago, "But what if there's a market crash and I lose all of my money?" Well, that would be a really bad market crash! If everything went to zero, that's a bad market crash.

If, on the other hand, one looks at the crash of 2007-08 or early 2000 or 1987, in general, if one continues to invest in the market, one recovers over the next four years. So, you need to begin to work with an advisor or read the research and the information out there about how to get comfortable with this risk and what it would really mean. And yes, keep some portion in low-risk securities if that helps one sleep--that's totally fine.

Benz: Sallie, such an important topic. Thank you so much for being here to discuss your research and discuss your thoughts on this topic.

Krawcheck: Thank you, Christine.

Benz: Thanks for watching. I'm Christine Benz for Morningstar.com.