Ellevest CEO Sylvia Kwan has a striking statistic she uses to explain why the company was founded: in a survey of asset managers by BNY Mellon Investment Management, 86% said their default customer is a man.

In this episode, the first of a two-part conversation, Sylvia Kwan shares why Ellevest is on a mission to close the gender investing gap and why it may be just as important as the gender pay gap.

We discuss:

1. Why the gender investing gap exists and how it contributes to the wealth gap
2. What Ellevest discovered about women’s attitudes towards risk
3. Sylvia's surprising route to becoming chief investment officer and then CEO
4. How Ellevest is breaking down the barriers that keep women from investing

---

About Sylvia Kwan

Sylvia Kwan is the CEO and Chief Investment Officer of Ellevest, a women-founded and women-led financial services firm dedicated to closing the gender wealth gap. Prior to Ellevest, she founded SimplySmart Asset Management and held senior portfolio management positions at Financial Engines and Charles Schwab. A Chartered Financial Analyst with more than 30 years of industry experience, Sylvia serves on the Board of Exit 182, the investment committee that oversees the endowment of Grinnell College.

Learn more about Ellevest: https://www.ellevest.com/

Follow Ellevest on LinkedIn: https://www.linkedin.com/company/ellevest/

Follow Ellevest on Instagram: https://www.instagram.com/ellevest

---

If you enjoyed this episode, don’t forget to leave a rating or review on Apple Podcasts or Spotify. Send questions for our guests or any feedback to: madeforuspod@gmail.com

Other episodes you might like:

Where is the female crash test dummy?

AI vs the feedback gap

---

Connect with Made for Us

1. Show notes and transcripts: https://made-for-us.captivate.fm/
2. LinkedIn: https://www.linkedin.com/company/madeforuspodcast
3. Instagram: https://www.instagram.com/madeforuspodcast/
4. Newsletter: https://madeforuspodcast.beehiiv.com/

I think as soon as you say, this is something for women, everyone kind of thinks, it must be junior varsity or it must be less robust. Maybe it's prettier, but it's less. And that drives me crazy because not only is it not less, I think it's actually more.

Welcome to Season 3 of Made For Us, the show where we explore how design can help create a world that works better for everyone. I'm Tosin Sulaiman.

We talk a lot about the gender pay gap, but my guest today says we also need to pay attention to another gap. Women aren't investing at the same rate as men.

Sylvia Kwan is the CEO and Chief Investment Officer of Ellevest, a woman-founded and woman-led financial services company dedicated to closing the gender investing gap. Ellevest's mission is to get more money in the hands of women and their families.

This conversation will be in two parts. Today we'll about Sylvia's surprising path to Ellevest and what the firm is doing to get more women engaged in investing. And next week, we'll be discussing the feminisation of wealth and why this will have huge implications for society more broadly.

Investing to close gaps is a theme we'll be returning to throughout this season. And my conversation with Sylvia - and with other guests you'll hear from - made me wonder how we can all use our money to create the future we want to see.

Now let's hear from Sylvia Kwan.

My name is Sylvia Kwan. am the CEO and Chief Investment Officer at Ellevest. Ellevest is an SEC registered investment advisor, and we specifically focus on helping women, families, and the next generation invest with intention.

And you've been at Ellevest from the beginning. It was founded in 2014 and it now has around a billion dollars in assets under management. And one of the things that you talk about a lot is that Ellevest is all about putting more money in the hands of women. And that was the original mission.

That's correct, but we are not exclusive actually to female and currently it is majority female, but it's probably, you know, maybe 60 percent or something female. And then the rest are, you know, obviously men and families. And we also actually have some, you know, single men as clients as well. And our mission actually has not changed. We are still completely focused on women and helping women invest with intention. And really the impetus for that was really the fact that women are sitting on the sidelines when it comes to money and investing.

So there's a BlackRock study that every year it basically shows that 70 percent of the average US woman's portfolio is held in cash. The same study actually showed that only 38 percent of women actually invest in the financial markets and more than half of women believe that investing just isn't for her. And so that's a real...a real issue because if you think about it, you there is a salary gap for women and if women are earning less and then they're not, they're sitting on the sidelines and not investing, and then they also live longer, so their money has to last longer, you know, women are just not set up well for financial success. So, Ellevest really was founded to change that, to figure out, you know, why aren't more women investing? Why are women sitting on the sidelines? Because this has obviously real financial implications for women.

And also, could you talk a little bit about your investors? I think quite a significant proportion of them are also women.

Yeah, so we're very proud and certainly honored to have such an amazing roster of investors, you for privacy reasons, I can't really name names, but you know, we do have a number of very prominent women who are also very focused on how do we advance and help more women. So a lot of individual, you know, women who are investors and that has made a tremendous difference for us as a company.

Right. And I know you can't name names, but this is in the public domain because I have read that in your previous funding rounds, you've had investors like Venus Williams and Melinda Gates's investment fund, Pivotal Ventures.

Yes, can certainly confirm those, yes.

Right. And so it seems like you've essentially created a virtuous cycle of women investing in women, investing in women.

Exactly. And it actually doesn't stop there. And I know we'll probably get into this a little bit later on, but one of the things that really sets us apart from other wealth management firms, other than our focus on women, is really understanding and respecting how women want to invest. And particularly as we are focused on wealth management right now, women really want to invest with intention. So really thinking about not only returns, returns are extremely important. We're very focused on returns but also making sure those returns are actually doing more than just financial, really making some kind of a positive impact. And that actually includes investing in other women.

So if you think about, for example, I know you've seen probably the statistic that less than 2 percent of venture dollars goes to women founders. That's a huge gap that we need to close. And so we've been very intentional about trying to seek out other managers that are investing in women-led teams to try to close that gap as well. They have the same financial criteria, but we're being very proactive about that. And so, you we've got women investors, we've got women clients, and we've got women clients investing in other women as well.

I'd love to talk about that more in the conversation. But first, I wanted to spend some time talking about how you came to be the CIO and CEO of Ellevest, because you've also had a really interesting journey. So I read that you were born and grew up in California. Your parents had emigrated there from China. And you said that your family didn't have a lot of money, but that you did get your love of finance from your dad.

I did. So my father, as you said, my parents were immigrants. came here. My father was trained as a mechanical engineer. And so he was working in a job as a mechanical engineer and he was just bored to death. And so in the evenings he would kind of dabble in the financial markets and found he really loved it. He really enjoyed it. And he decided, even with a family to support, he decided to take a pretty huge risk, quit his job and became a stockbroker. And at that time, way back when, this was decades ago, stockbrokers were really in a sense salesmen. You're basically trading stocks and trying to get clients by convincing them that you can pick stocks better than the next person. Huge commissions, not a lot of transparency, very, very different from what we have today.

And my father, if you were to meet him, he's very quiet. Still to this day I'm puzzled on why he chose this. It really was from his love of markets, because he is not a good salesman. Let's just be honest, he is not a good salesman. But it was really through his track record that he was able to be successful. And so in the household, it was a very normal conversation to be talking about investing and talking about stocks. And he subscribed to the Wall Street Journal and the Barons. Every week I would, I didn't know what I was reading, but I would flip through it and we would watch a news show every week with him, just to spend time with him. And so it was a very natural conversation for me, but it wasn't something that I aspired. You know, like, I want to follow my dad's footsteps. There wasn't kind of that notion. It was just, I liked to spend time with my dad and this looks kind of interesting.

So I never intended to go into financial services. And in fact, my mother, I remember her admonishing my brother and I and said, you know, can pick whatever career you want, but don't follow in your dad's footsteps. Because she saw it was quite such a struggle for my dad in the beginning.

So my undergraduate degree was actually in computer science and I had planned a career in to be a software engineer. And in my senior year, I started interviewing at large firms and I would go visit them. And I realized, I don't think I'm going to be happy here. I feel like I'll be, you know, a small part of a large project. It'd be very difficult to see what my contribution was. Wasn't sure the culture was for me. And then I was like, Ooh, you know, now what do I do?

So I ended up working at a bank in Boston in kind of a rotational management program where you would rotate every three months into a different department. So it was perfect for me as a chance to kind of kick the can down the road and figure out what I really wanted to do. So my last rotation was actually in a quantitative investment group. And I realized I found my home. I just loved the analytical nature of it. I loved the dynamic nature of the markets in the sense that you're never done. You're never like, oh, I figured it out and I'm done and I'll just like rinse and repeat. There's always something new to kind of figure out. So it was continuously challenging. I loved the markets and that's kind of how, that's pretty much how I started my career in financial services.

Oh wow. So it wasn't planned at all.

Exactly, and much to my mother's dismay.

And before joining Ellevest, what were the other pivotal moments in your career?

So I started my career at this bank as a portfolio manager in fixed income. So I was managing fixed income portfolios for large pension funds in the US, so on the institutional side. And then I spent some time at other firms like Schwab. I moved over to the retail side. But I would say a big pivot for me was after Schwab I joined my first startup. At that time, I don't think FinTech was a word at that time, but it was a FinTech startup called Financial Engines, which today is now called Edelman Financial Engines. But it was my first startup, number one, in financial technology. It was probably my, really my first mission-focused firm.

What Financial Engines was trying to do was bring institutional quality advice to average Americans to manage their retirement portfolios. So it was really that combination that was just really, really appealing to me to say, wow, you know, I feel like I'm doing really meaningful work in the industry that I have experience with, and then also the marriage of technology to drive costs lower and to increase quality. Those kinds of things, that was a pivotal moment for me in the sense that I knew that's what I wanted going forward in my career.

Right, so you were essentially a fintech pioneer and you got your first taste of impact.

My first taste, and then I was hooked.

From then on, think you were there for about 10 years, is that correct? And then what happened after that?

I was there for 10 years and it was really an incredible 10 years, know, from going from just having a vision and a mission to growing the firm where we ended up at the time that I left. So at the time that I left, obviously I'd been there for a long time, played many different roles, and I felt like it was time for something a little bit different. So I left and joined another kind of similar startup, but more in the wealth management space. I believe it was 2010, which was not a good time for a wealth management startup. So that did not last very long.

And then after that, I started my own Registered Investment advisor to serve high net worth clients. And that's, would say, another pivotal point. One of my clients during that time was the one that really pushed me to think harder about investments and their impact other than financial. And she was the one that said, you know, I don't want to invest in these mega firms. Like I really want to invest in companies that I feel are really doing the right things for our communities, the right thing for their employees. And really made me think, I was like, wow, okay, that actually makes a lot of sense. You know, just from a intentional perspective, but also in terms of long-term success. In my mind intuitively made a lot of sense if those companies that are taking care of their employees, their customers and communities, I believe will do better from a financial perspective in the long run.

And so that's really when I started really digging more deeply into this area of impact investing. And then of course, while I was doing my own firm is when our founder of Ellevest, Sally Krawcheck reached out and told me that she was starting this new company that was focused on women. And then it was like, wow, I've always been interested in helping women just noticing and observing how many fewer women are involved in investing. And so the combination of that mission that was near and dear to me, the fact that it was a FinTech type of company, I felt just really allowed me to bring so much of the lessons learned from my first FinTech to bear in this new company. So it was like all of these perfect storm things in a positive way coming together.

Let's go back to when you got that call, was it a call or a message from Sally Krawcheck? Because it must have been a big deal at the time. Could you walk us through what happened and what you were thinking?

It was a huge deal, a huge deal. Anyone in the US who works in the financial industry, if you're a woman, you know who Sally Krawcheck is, right? And so of course I knew who she was, but she doesn't know me. And so she actually reached out to me on LinkedIn and it was a cold reach out. It was just a message. It wasn't a warm handoff. You know, we both know John and he recommended that I spoke to you. It was just, uh, hey, you know, I, I'm starting this new project that I think you might be interested in. And it was like literally two or three sentences, very vague.

And when I saw it I was like, at first I was like, oh wow, you know, Sally Krawcheck’s reaching out to me. And then I was like, is this really Sally Krawcheck? Because why would she be reaching out to me? You know, it's like typical, you know, the insecurity kind of comes in as like maybe somebody hacked into her account. That was the first thought I like, it must be some kind of fraudster, you know, pretending to be Sally Krawcheck, because why would you reach out to me kind of thing?

So I, you know, of course I responded because I was like, well, just in case it really is her, you know, I should respond and find out more. And so a few days later, well, actually then she called me and I confirmed that it was truly Sally Krawcheck. And then a few days later, she was out in San Francisco and we met and talked. And that's when she told me about her idea. And I was like, this is amazing. I'm in.

Before we continue, just for people who don't know, Sally Krawcheck, she was the former CEO at Citi Wealth Management and she'd had a distinguished career on Wall Street up until that point.

Exactly.

So you decided that you were in, I think you weren't planning to join another startup, that wasn't part of the plan again…

You’re so right, that was not part of the plan. I was very happy in my lifestyle job, managing a handful of clients. In the meantime, financial industry had gone IPO, so was very fortunate to have a very long runway to figure out what I wanted to do. And I thought, I'm not doing another startup. I'm too old, I don't have the energy for that because I knew what it took to do that. It's a lot of fun, but it takes a lot of energy. I thought I'll leave that to the next generation to do. So I’d kind of sworn off startups. But then when Sally came, it was too amazing of an opportunity to pass up. And certainly working with Sally was a big part of that, you know, being able to work with her to build this. It's been an incredible journey since then.

So let's talk about the problem that Ellevest was trying to solve and is trying to solve, which is closing the gender investing gap, which you talked about earlier. Most people have heard of the gender pay gap, but the gender investing gap and then the wealth gap more broadly don't get as much attention, but they're all related. And so could you explain what Ellevest’s take on the issue is?

Yes, you're absolutely right that they are all related. There's not much that we can do, meaning Ellevest, about the pay gap. But the gender investing gap, that's where I pulled in that kind of study from BlackRock that shows that 70 per cent of an average woman's portfolio is sitting in cash. And certainly over the last, you know, even couple of decades, you cash has not earned very much, has earned very, very little up until just recently. And so if they are just sitting in cash, they're missing out on those market returns and then compounded, obviously, that can be a huge number. And that together, I would say with the pay gap, are key contributors to the wealth gap.

So the wealth gap is that for every dollar that a white man has, a woman has something like 30 cents. And for women of color, black women and women of Hispanic, Latino, it's literally a penny. So it's a huge, huge gap. And so in the US, traditionally, individuals have been able to build wealth through a couple of means. One is through real estate, through owning a home and having that home appreciate. And then the second is through investing. And so we believe that investing can play a significant role in helping women build wealth to try and close both the investing gap and the wealth gap at the same time.

And before you launched Ellevest, you conducted thousands of hours of research with women. What were some of the consistent messages that you heard about their goals, their attitudes towards investing, towards risk, et cetera?

So what we discovered is women have a very different approach when it comes to money and investing. So a couple of things that we discovered were that women, when they think about investing, it's really a means to an end. So they're thinking about investing in terms of goals and what are my financial goals? I want to retire well, for example. I want to send my kids to college. I want to be able to take care of my elderly parents, whatever. I want to buy a second home. It's figuring out how to invest in order to reach those goals.

This isn’t compared to, just want to beat the S&P 500. I just want to make as much money as I can at the end of the day, which is, you know, I'm not saying that those aren't necessarily men's goals, but it's really how the industry thinks, right? You know, did you beat the S &P 500 this month or not?

So that approach requires, I would say, different solutions for women. There are also women's realities, such as women live longer. Many women take a career break to raise children and whatnot. And so their life cycle is a bit different from a man's. And those realities obviously need to be taken into account as well.

Third, would say women have a different way that they like to deal with risk. I know there's a common perception that women are more risk averse than men. And what we found is that that's actually not true. Of course, there are some women who are more risk averse, but in general, that's not true. I think women really want to understand risk. And so they will take more time to understand the risks and understand the trade-offs between short-term trade-offs, long-term trade-offs, longevity risk, all the different kinds of risk before they jump in. And sometimes I feel like that extra time that women take is somehow perceived as being more risk averse, which is not true.

I think it's a smarter way to think about risk. I'm a little biased here. So helping them understand that as well. In terms of the industry, I think there's a really interesting study a couple of years back by BNY Mellon that showed that 86 percent of asset managers that they interviewed for the study basically admitted that their default customer, like the person that they're developing products for and communicate to, is actually a man. So, you know, just like for other industries, women are, you know, are not smaller versions of men in some sense, right? And then we found that, you know, 80 percent of women feel misunderstood after meeting with their financial advisor.

We learned a lot about how women dislike the jargon that is being used. I think the financial industry tries to make things kind of feel complicated. So you need them and women really value more transparency and the data actually really, I think backs up this notion that the financial industry was really built by men for men, not in a intentional, we're going to exclude women kind of way, but just it was predominantly men. And so of course you're going to build things that make sense for yourself, right? Without thinking that there may be another approach that others might prefer. And so, you know, 79 percent of women leave their joint financial advisor in the year after their spouse dies. I mean, these statistics are pretty significant. And so this is the problem that we're trying to solve is how can we create solutions, approaches that really welcome women into the investment industry and engage them and help them to feel empowered to really take control of their financial future.

And so it seems like the conventional wisdom at the time was, you know, the issue is with women, women need to change. They need to be less risk averse. But basically from your research, you found out that it's essentially the issue is with the industry. The industry hadn't taken the time to understand women's needs and to develop products for them.

Exactly.

So based on the insights that you gathered, you built Ellevest’s investing algorithm, which at the time was the only gender aware algorithm in finance.

Yes. So we built the algorithm based on research and also women's lived realities, like I had mentioned before, incorporating the fact that women on average live longer than men. So stretching out that period of retirement. And then also we used a gender specific salary curve. And this is actually based on actual data in the U.S. that really shows, and it's actually kind of discouraging. It basically shows that women's salaries peak 15 years earlier than men's.

And so if you think about some of the investing algorithms out there, they're generally very straightforward. They assume maybe a 3 percent salary growth every year, it’s kind of linear. It doesn't work that way for women, especially if they're taking a career break, they're taking a couple of years off, they have young children, they jump back in. Typically, it's at a lower salary. And so really, you know, taking that, those considerations into, to build into the algorithm, to show a more realistic picture of what women should expect. And then also now what do we do about it? And in most cases, unfortunately, that means women need to save more and earn more.

So essentially you had to create a completely new algorithm because there wasn't anything available that you could work with.

That's right, that's right. We created a new algorithm and all of that was underneath the hood, the engines that were running. And I would say we also created a completely new front end, an experience. Cause that's the other thing that we learned. It's why can't investing be as beautiful as anything else? You know, why does it have to be cut and dried, you know, with pie charts and numbers and you know, it doesn't have to be that way.

And so building a beautiful experience that was simple, that actually was more of a goals-based. So in other words, instead of filling out a questionnaire and asking women what their risk tolerance is or asking a set of questions, which is typically what most advisors do, right, to get an assessment of whether you're moderate, aggressive, or conservative.

That's not the way that women really approach wealth, as I mentioned, they're really about goals.

So, you one of the first things we ask is what are you investing for? And that helps us to know, are you investing for retirement and you have 40 years, that's a very long investing horizon, or are you investing to purchase your first home in five years? Totally different portfolio. And so from that perspective, you know, a risk questionnaire didn't make sense in the goals-based framework, right? Because if I say, hey, you're a moderate investor, but you have these two very different goals, I'm not gonna put you in a moderate portfolio for both goals. It doesn't make sense from a fiduciary perspective. And so it was really rebuilding the experience to match the approach that we heard women really wanna take with investing, and then putting a beautiful front end on it.

I'm curious about the reaction that you got in the early days because I guess 11 years ago, this focus on women was a pretty radical idea to some. What were you hearing from others in the industry, from VCs, particularly male VCs?

Plenty. I would say the very first thing was, wow, why would you focus on just a niche part of the market. When more than half the population are women, somehow women are the niche market, which kind of tells you a little bit about something about the financial industry. So that was the number one thing is why would you cater to a niche market when you can like, you know, try to go after the whole market?

Second, why do women need their own investing platform? Why do they need their own investment products? So again, I feel like that speaks to the lack of understanding of what women are looking for. And also kind of ignoring the data that women are not engaged with investing. So those were, I would say the two. And then certainly we had a lot of folks that just didn't think, you know, they didn't think it was necessary. So they didn't think it was that we're going to be successful. Like this is, you know, this is a stupid idea, basically, If I cut to the chase.

And I also read that there were some women who were skeptical of the idea of something that was built for women.

Yeah, that's probably one of my biggest pet peeves. I think as soon as you say, this is something for women, everyone kind of thinks, it must be junior varsity or it must be less robust. Oh, maybe it's prettier, but it's less. And that drives me crazy because not only is it not less, I think it's actually more. I think we have an investment platform that I have not seen at any other investment firm out there. We have incredible investments, a great lineup.

And so in some ways I feel like that is just, it's an unfortunate perception. I think it's not only in the financial industry, but of course in other, plenty of other industries and other areas as well. It's immediately, oh, it's for women, then it can't be as good. And so trying to debunk that myth through obviously results, cause that's gonna say, and also just showing like, hey, this is how we do things. This is why we do it. This is why we think it's better, at least for our clients, and that the proof is going to be in the pudding. But I think it does take time to really debunk that myth.

That was part one of my conversation with Sylvia Kwan, CEO and CIO of Ellevest. Next week, we'll get into the feminization of wealth and why Sylvia believes it just might change the world as we know it.

When women have more capital, they make different decisions that can really have significant impact. We think there could be a seismic shift, not only in terms of investments, but also even on spending.

If you enjoyed this episode, a rating or review helps more people find us. And why not share this with someone who needs to hear it? I'm Tosin Sulaiman. See you next week.