Betsy Cohen and Sallie Krawcheck on innovation, fintech and investing
Transcription:
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Penny Crosman:
As Whitney said, these two ladies need little to no introduction. I’m here with Sally Krawcheck and Betsy Cohen. Just a few very brief highlights from their very impressive careers. Sally was Chief Financial Officer at Citi. She was the CEO of Citi Wealth Management, Merrill Lynch Wealth Management and Smith Barney. She founded and is CEO of Ellevest, a company that helps women invest. And she also writes or contributes to a newsletter called What the Elle, which I just subscribed to. It’s very interesting. Betsy Cohen was one of the very first women in the U.S. to be a law professor. She and Ruth Bader Ginsburg. She was one of the first women to be a CEO of a bank. It was Jefferson Bank in Pennsylvania. And then she founded the Bancorp Bank, which was one of the first banks to provide banking as a service, be the bank behind a number of very large fintech companies. And when she left there were about 1600 fintechs that the Bancorp Bank was working with. She’s also been called the Spac Queen. I’m not sure if you like that title?
Betsy Cohen:
Absolutely,
Penny Crosman:
She’s done a lot of SPACs. So I wanted to start with a question that I always think is fun, and I especially want to hear from Sallie because she has a very interesting answer. What is your morning routine? We’ll start with you, Sallie.
Sallie Krawcheck:
Well, it’s not because I wanted to be my morning routine. The part that she’s laughing about is… so I love waking up early. I love the time before everybody else is awake, particularly when my kids were younger, that sense of peace that comes from everybody’s here and everybody’s asleep, and I get my very best thinking done in the morning. But the part that you like is before I wake up immediate cup of coffee. But I have a cat who demands what essentially is a deep tissue massage before she will allow me to do anything. And if I don’t do it, she keeps at me. But what I also like to do is first thing in the morning, I’m fortunate enough to live close to Central Park and just roll out in the park as early as you possibly can and get the cardio in, get the sunlight in, et cetera. And I used to start work at seven o’clock. I now start at closer to nine just because going through that whole morning routine and I think sets you up for a great day. What about you?
Betsy Cohen:
Well, I’m with you. I love getting up early in the morning and having that maybe hour, hour and a half when you look at the 200 emails that you got overnight. But at least the phone is not ringing and no one else, no one is bothering you and you have an opportunity to think about things. I like to start with a cup of coffee as well, but I do not have a cat. That’s your problem. I will live with it, but I love to do puzzles. So I work my way through the New York Times puzzles in the morning and then I’m ready to face the day.
Penny Crosman:
How long does it typically take you to get through the crossword puzzle?
Betsy Cohen:
It depends upon the day of the week, but generally I spend maybe 45 minutes doing the range of puzzles within the New York Times. Yeah,
Penny Crosman:
There’s a growing variety. So because we want to talk about leadership and we want to talk about fintech and growth, we wanted to ask you both a little bit about your journey so far, starting with you, Sallie, because you started Ellevest as a startup and now you’ve got, I don’t know how many members, but you’ve been going strong for at least five years. Can you tell us a little bit about how that journey has gone?
Sallie Krawcheck:
So I am not a startup. I am not in a startup ecosystem. I don’t think of myself as an
Penny Crosman:
Entrepreneur. So I wanted to start with a question that I always think is fun, and I especially want to hear from Sally because she has a very interesting answer. What is your morning routine? We’ll start with you, Sally.
Sallie Krawcheck:
Well, it’s not because I want it to be my morning routine. The part that she’s laughing about is, can you all hear me okay? No. Yes. I don’t know if it’s working. It’s a microphone. Oh, okay. Is it working now? It’s on. Okay. No, it’s okay. So I love waking up early. I love the time before everybody else is awake, particularly when my kids were younger, that sense of peace that comes from everybody’s here and everybody’s asleep, and I get my very best thinking done in the morning. But the part that you like is before I wake up immediate cup of coffee. But I have a cat who demands what essentially is a deep tissue massage before she will allow me to do anything. And if I don’t do it, she keeps at me. But what I also like to do is first thing in the morning, I’m fortunate enough to live close to Central Park and just roll out in the park as early as you possibly can and get the cardio in, get the sunlight in, et cetera. And I used to start work at seven o’clock. I now start at closer to nine just because going through that whole morning routine and I think sets you up for a great day. What about you?
Betsy Cohen:
Well, I’m with you. I love getting up early in the morning and having that maybe hour, hour and a half when you look at the 200 emails that you got overnight. But at least the phone is not ringing and no one is bothering you and you have an opportunity to think about things. I like to start with a cup of coffee as well, but I do not have a cat. That’s your problem. I will live with it. But I love to do puzzles, so I work my way through the New York time puzzles in the morning and then I’m ready to face the day.
Penny Crosman:
How long does it typically take you to get through the crossword puzzle?
Betsy Cohen:
Depends upon the day of the week, but generally I spend maybe 45 minutes doing the range of puzzles within the New York Times. Yeah,
Penny Crosman:
Yeah. There’s a growing variety. So because we want to talk about leadership and we want to talk about FinTech and growth, I wanted to ask you both a little bit about your journey so far starting with you, Sally, because you started Ellevest as a startup and now you’ve got, I don’t know how many members, but you’ve been going strong for at least five years. Could you tell us a little bit about that, how that journey has gone? Yeah,
Sallie Krawcheck:
So I am not a startup, am not in a startup ecosystem. I don’t think of myself as an entrepreneur. In fact, as you mentioned, my career was big, ugly banks, a research analyst, and then big ugly banks and sort of got myself a little bit of a reputation. I was brought in to turn around the research business in Smith Barney at Citi after the research scandal, the early two thousands, I was brought in to turn around Merrill Lynch after Bank of America bought it during the subprime crisis of 2008, et cetera. So I don’t think of myself as a startup person, but I always thought of myself as sort of a turnaround person and an adrenaline junkie. And I guess the good news when you’re a turnaround person is it’s exciting. And the bad news is sometimes you don’t stay for that long. And so I got reorged out of Merrill after turning it around and had the opportunity to go back and do another big bank turnaround with a come in, we really need you.
No promises, but it works out. You can be the ceo. And I’m like, y’all keep doing that to me. I’m not going to fall for it this time. And just spent a couple of years really, and I was fortunate enough to do it, really trying to think what is the most impact I can have? What is the most fun I can have? What’ll be the most engaging? What is important to me? Is it title, is it complexity? Is it big office? What is it and what’s not important to me? And I really came out to, I’ve been so fortunate to have career experiences that not only other women but no other person have had that. When I sort of recognize, ah, women don’t invest as much as men do, the whole industry says it’s because they’re risk averse. Maybe it’s actually because the whole industry is so overwhelmingly male and they built businesses for themselves. What if we can build the investing platform, the wealth tech platform that centers women? Maybe they are risk averse, maybe we’ll fail or maybe we’ve just never built anything for them. So I think when I found that I was turning 50, so at an age when other folks are about to do the board thing, I was out schlepping around to raise venture money, which is Betsy and I agreed is easily the least fun thing you can do. Other unfun things are not even close to that least fun thing you can do.
Betsy Cohen:
Absolutely.
Sallie Krawcheck:
So every day’s an adventure.
Penny Crosman:
So how about you, Betsy? You’ve been a law professor, you’ve been a bank CEO, a bank founder, now you’re an investor. It sounds like this is the least fun part, but what have been the high, low, most fun parts, the times when you felt fulfilled, appreciated, happy and so forth?
Betsy Cohen:
Yeah, I feel fulfilled and happy on a regular basis. I am sorry to admit, but I really started where Sally finished in a sense, which is finding ideas and having that aha moment with respect to the areas that I knew. And I knew them because I had taught them. I had practiced law in those areas. And so each step of the way was building on top of experiences that I had had before. When I started, my husband and I met in law school. And so when I finished my stint as a law professor, because there wasn’t enough action, we started a law firm together. So it was beginning something and I brought to the practice an idea that terrified the people who came to practice with us, which is not that we would go out and solicit clients, but we would announce to the world that we were going to take five clients. They were going to be very complex and you had to apply for the position.
It was a novel approach, but it’s really been my hallmark in terms of looking at structures and saying, how can we make them more interesting not only for our clients, but for ourselves. And so this was the beginning of a journey where I started a bank, started a public fund that was based on a combination of historic and low income housing credits and continued to look for those areas that not were underserved, but where there was what I like to call negative space where there was an opportunity to do something in a little different way. And that’s what led me through the bricks and mortar bank through. And it was the first charter that had been granted in 15 years in Pennsylvania through a series of technology touchings because technology, we’re talking now about the eighties and nineties. Technology wasn’t what it was even in 2000. And it certainly was not. And I have another opportunity today to take advantage of the technology that is currently very deep and very connected to the client base. So it’s looking again for those areas that are underserved because nobody’s gone there
Penny Crosman:
For sure. So when you think about what I call the FinTech movement, when FinTech started becoming more and more of a thing, they started using banks in the background from about 2000 through today. How far do you think we’ve come in terms of innovation, both technology, innovation in finance and financial innovation? And has it all been good? Start with you?
Betsy Cohen:
Nothing can all be good. It’s just right out of the box. But I mean, I think we have to remember that there are two sides to the equation. There’s the development of the technology, but there’s also the customer who has to be able to use that technology. And so we always focused on how were these two streams coming along together. And that connectedness is what I focused on in building Bancorp and what I would focus on in evaluating companies within a fund or building a new banking institution.
Penny Crosman:
There’s demand and there’s strong technology. That combination is that
Betsy Cohen:
Combination. They are not always at the same place at the same time.
Penny Crosman:
Okay. How about you? When you look at FinTech or if you think about a FinTech you might want to partner with or even invest in, what do you look for?
Sallie Krawcheck:
Well, first of all, I’d say it’s sort of a long run trend of fin and tech together. Even the banks since the creation of the ATM, right? It’s been this back and forth between is it people or is it technology? Technology is going to take over for people? Is it one or the other? And of course it’s never one or the other. It’s both. And I think we’re going to see increasingly technology doing everything that technology is better at doing and people doing those things that cannot, the relationship management that can’t be replaced in any other way. So when we started Ellevest, we were a digital only offering. We put together highly personalized investment portfolios, a really engaging experience, a really personalized feeling, experience and recognized because we heard from her over time, gosh, I’m about to get married and how do I figure out with my partner to be how we’re going to split things.
Can you have a person help me? Even more importantly, I’m about to get divorced. We recently rolled out comprehensive divorce plans. You’ve always had the lawyer, but to have someone who has been through a divorce herself is a certified divorce specialist to be there for him, people want people for that. They don’t want an interactive technology. And so at Ellevest, I love to say we have no investing minimum and no investing maximum. And that her first part of her journey is digital. Mostly her middle part of the journey is a combination with a financial planner. And then as she becomes wealthier, the technology really goes to supporting the financial advisors that we have and that it’s more of an in-person personal touch. So I think this is just a long wave trend that will continue where technology will just take over what it can.
Betsy Cohen:
But I think what you heard from Sally is critical because she analyzed and understood what the problem was. And that’s the critical thing in terms of building either on the tech side or the tech plus high touch side or only high touch. Each step of the journey solves a different problem. And that’s I think what we’re trying to do.
Penny Crosman:
So in both of your businesses, it seems like a bedrock for growth and innovation is generating good ideas and pursuing the best ideas. Can you say anything about how you come up with ideas or how you help other people come up with ideas and how you decide which ideas you’re going to follow through on and which you’re not?
Betsy Cohen:
I mean, it’s a continuation of my morning puzzles. It’s that way of thinking. And you continue to think about what is the glitch, yesterday’s glitch that you can solve today or tomorrow. And we like to say at Coen Circle that our most important product is thinking. And that’s what we do best.
Sallie Krawcheck:
It’s funny for you, it’s the puzzles. I’m going back to my walk in the park. There’s research that shows that’s where the ideas come from. If you think about something, you think about something, you think about something, stop thinking about a go for a walk. I’m the one who’s stopped over by the side of the reservoir typing something into my phone. I’ve had people, are you okay? First thing in the morning? But the ideas sort of come and then most of them are really stupid, really some dumb things. But then we use testing rigorously. I mean, my first idea for Ellevest, which I was pretty Ellevest serves women. I’m a woman in investing. I had no investing. And my theory of the case was women’s problem is they have issues with money. That and why not money Media for men is positive and affirmative overwhelmingly so for women, it’s very negative, it’s patronizing, it speaks down to her.
It calls her a spendthrift. And so I thought, well, there’s a problem. We need to do an Oprah journey where she can identify her issue. I know even as I talk about it, I’m like, that is so stupid. But I really felt pretty strongly about it. And we built an entire prototype and she said, I do have issues with money. I just don’t want to solve ’em with you. What I want is to buy a home in five years, start a business in three years, have a baby, retire at 65. Nope. What about at 62? What about at 70? What if I have my pre-retirement income? Or what if I have 50% of it? Or what if instead of a house, I get a condo? That’s what she wanted to do. And so we flipped the whole thing and built a goals-based, a true goals-based investing platform that allows her to do that. And it was just through rigorous testing that we sort of started with an idea and got to something completely different.
Penny Crosman:
What does that testing look like? A focus group or
Sallie Krawcheck:
No, I hate focus groups. The problem with the focus group is whoever says the first thing, that’s where the focus group goes. And if it’s two people say it, it overwhelmingly goes there, three people, it’s over. And you can have eight other people like, oh, I didn’t think that. But now I think, so in those early days, we did a lot of going into women’s homes, we did a lot of user testing, throwing up wire frames and having her go through the experience. A lot of card sorting was good. And then a ton of just AB testing. So if there was a kind of testing besides focus groups, we did it. And then of course, once the product’s out, we’re using the intelligence that we glean from her current actions to further refine the product.
Penny Crosman:
I think another critical element to growing a startup or any company is strong leadership, obviously. Can you both share what leadership principles you have leaned on? There’s a lot of talk lately about stoicism and applying stoic principles to leadership. I don’t know if that resonates with you, but is there anything?
Betsy Cohen:
No, I’m highly indulgent. I think that’s a much better path. Much more fun.
Sallie Krawcheck:
Go
Betsy Cohen:
Ahead. No, I mean I think it’s the communication of one, the idea which is really the mission, the joint mission of the organization. Secondly, the recognition of good work and supporting that and investing in people and allowing them to grow professionally. The rest of it is finding a doctor when their father’s sick and all the rest of it. The very personal interaction that is possible with, if I have 700 employees, I get 700 emails a day each from, but it’s that kind of connectedness expressed as you might express it. Not everybody expresses it the same way.
Sallie Krawcheck:
Yeah. I’m going to answer it a little bit differently. I think you’ve really hit on the importance of that leadership, but how did I actually get to a place or have an idea that I could lead from? And part of that is I am an absolutely natural contrarian. I was fortunate that I started as a research analyst, a sell-side research analyst where if you want to stick out, you need to be saying something different because I already stuck out. I was the only woman really, it felt like in the industry when I did it, I already stuck out. So I’m like, I’m going to stick out even more and I’m never going to publish the quarterly earnings reports that they came in a penny ahead and half the penny was this, and the other half the penny was that. And who cares, right? But I remember my director of research saying big calls on big stocks, big calls on big stocks.
And I took that through my career where you sort of can spend time moving along, leading managing people, et cetera. But then there’s some times when you see a big opening. And for me it was research at hand for Bernstein when everybody was doing all the research, analysts were doing research and investment banking. And I looked at that and said, that’s a conflict and people are going to get in trouble. And we got out of investment banking, we almost went out of business, and Eliot Spitzer came in and found all the emails that say, I’m recommending to stop, but it’s a piece of crap. But, and everybody else paid fines and our business went vertical. And I think we found the same thing with Ellevest, which again, the entire industry, we know what the issue is with women in investing, it’s their fault. And we said, we think there may be another issue. And so finding those openings, which may become only a couple or few times in a career for Betsy, it’s been several times. But to find those openings and be brave and contrarian and convince people to come with you.
Penny Crosman:
That makes sense. So the FinTech market has been a little bit of turmoil the last few years. Consumer facing fintechs especially had a very rough 2023, I would say. What do you think the outlook is for growth and profitability for fintech? I know that’s very broad because it depends who you’re talking about, but what do you kind of forecast for the market going forward?
Betsy Cohen:
We’ve had a lot of saturation of users as well as when I say users and customers as well as companies that have partnered with FinTech companies. I think the rate of growth may not be sustainable, but what is sustainable is the increase in the delivery system. And I think that’s what the technology is really expressing today, which is embedded finance, ease of access, all the other things that allow people to make a choice to use a particular company, technology niche, whatever it happens to be. So I think there are niches that are differentiated that will in fact grow substantially. But if you want to look at it as an aggregate, it may not be the kind of growth that we had in 2017 to 20.
Sallie Krawcheck:
So I don’t tend to, because I’m a CEO of a startup, I don’t tend to think about FinTech at large. I think about Ellevest and our opportunity, and I am wildly bullish because something is starting to happen that most folks don’t know and that most folks misinterpret. And that is the great wealth transfer, which I say is going to do for women’s wealth. What lean in did not, women’s longevity. So the boomers generated the most wealth in history. The gentlemen are beginning to pass away. And we think about that money going to the millennials, it goes to her first because 80% of women die single. 90% of women manage their money on their own at some point in their lives. It goes from him to her when it goes to her today, if they are at one of the big wealth management firms, she leaves at a very high rate Back when I was running, 70 to 90% of women leave in the year after their spouse’s death.
And today that money goes into the banks. And so if we can be in the way of that and be helpful to her, it is an absolutely enormous opportunity. And in fact, we started in our private wealth and our personal wealth offering. We’ve got a couple of new things we’ve offered, and we thought below the million dollar level of investment, and we thought that’s going to be women in their thirties, their forties, they’re getting the stock options, they’re getting it done. Nope, it’s women in their fifties, sixties, and seventies who are getting inheritances or getting divorces. The reason I feel so bullish about this is when you ask men about the great wealth transfer and you say, who is this going to benefit? Most only 17% of men say it’s going to be women. And so I feel like the industry certainly is looking the other way and the opportunity to be there for her is significant.
Penny Crosman:
Those are startling figures. So before we leave, I was wondering if you could each offer one piece of advice to fintechs and the audience who are hoping to grow and hoping to do really well in the coming year.
Betsy Cohen:
Sally, go ahead.
Sallie Krawcheck:
I think you just have to be realistically stubborn. Particularly I see a lot of women in this room. We all know the stats around women raising venture dollars. It’s still women CEOs raise 2%. What we don’t often think about is that that means it takes, by definition, if you do the math 50 times longer and 50 times more meetings and 50 times more models sent out and 50 times more questions answered and 50 times more stupid questions answered, and 50 times more, can you really believe how idiotic this person is? Questions answered. And you don’t typically get the money in one meeting. And so there is not a single woman I hear from who’s raised money, who hasn’t had hundreds of meetings. And so you have to really be, really think about what the market signal is, is the signal, is it’s really a bad idea, is the signal that you’re a one and you’re going to have to continue to go through this. And I hate to say it, the numbers are worse than the average for FinTech as well. So trying to be, give yourself the time, make sure to have the passion. If you don’t have the passion, it’s miserable. It’s already difficult. But if you don’t have it, it’s completely miserable and network like crazy.
Betsy Cohen:
Well, I would agree with everything that Sally said and just add one additional thing. She’s identified the need to really focus on what the problem is that you’re solving to make sure that in the marketplace it’s a realistic assessment of a need that’s out there. And it’s just not in your head, but it’s really knowing yourself and what you can do and what are your strengths and maybe finding partners. Sally spoke about networking. It’s not only networking outside your company, it’s networking inside your company so that you develop a differentiated and distinct team that can address both aspirations and inspirations, but also day-to-day growth.
Penny Crosman:
Alright, well, Betsy Cohen, Sally k Crche, thanks so much for joining us tonight.
