At Morningstar, Sallie Krawcheck blasts her own [presumably ex-] financial advisor -- and herself

Brooke’s Note: There is only one Sallie Krawcheck. She is the Barry Sanders of the financial services world, somebody who seems to have left stardom semi-inexplicably at the height of her powers. Now it’s a four year drift and taking on an air of permanency — mostly of her own volition, though she was fired. Barry quit. Krawcheck brings an unselfconsciously contradictory slant to her speeches — still with buy-in of Wall Street wirehouse legitimacy but making money talking about how it stumbles on women, both as clients and when it comes to hiring and promoting her gender. You don’t hear her praise RIAs, or even what they are about, but she doesn’t mind speaking to them, at least for a decent fee. So we like her but we’re not entirely sure where she’s coming from at times. Her speeches accomplish something — personifying all the paradoxes of Wall Street, women and the biases of culture that get blown up cartoon size in the business of managing other people’s wealth. That’s worthy of this article as you’ll see.

If Sallie Krawcheck never works another day on Wall Street, she can still make a living by talking to RIAs about how her old crowd doesn’t get — in both senses of the word — women.

It’s going on four years since Krawcheck abruptly left Wall Street’s upper echelons — stepping down as president of Bank of America’s wealth management division, namely Merrill Lynch. See: Merrill Lynch brokers brace for sweeping comp changes as Sallie Krawcheck departs BoA and takes her advocacy with her.

At the opening day of Morningstar, Inc.'s national conference in Chicago, Krawcheck did speak about women but did not once mention New York-based Ellevate Network and Ellevate Asset Management — she is chairwoman of both entities. Neither, in defiance of the unwritten rule for 2015 financial services industry conferences, did she say a word about robo-advisors.

This was especially disappointing given the rumors that Ellevate Asset Management is poised to become a robo-advisor for women. See: Word from Sallie Krawchek on where our financial system stands five years after the Lehman crash.

But the ex-Merrill, ex-Smith Barney brokerage chief’s pleasing self-deprecation was on display as she described her reaction to her own financial advisor dropping the ball in 2006 while shouldering her share of blame. Krawcheck vividly remembers discussing what would happen if the bottom dropped out of the market. Their mutual conclusion: “it would suck but you’ll be fine.”

At the time, Krawcheck was chief executive officer of Citi Wealth Management Group and Citi stock was her second-largest asset.

“We didn’t talk about Citi stock … and what would happen when it went from $54 to less than $1. We also didn’t talk about my biggest asset — which is me — and if the market goes down, what are the chances of me keeping my job — they aren’t so high. Add that my husband was in financial services and we owned real estate in New York. Shame on me and shame on him. You need to think about risk management and we didn’t think about risk management. You need to bring in that kind of holistic planning.” See: Sallie Krawcheck talks tough — and with disarming openness — online about the glass ceiling and lip gloss.

Values and other women’s issues

Krawcheck candidly admitted that she now urges advisors to adopt many of the practices that she shunned while at Merrill Lynch.

Values-based investing is one of them.

“If you’d walked in my office and said we’ve got this [values-based kind of] fund, I’d say, get out of my office, you freaking tree hugger. You can’t do it.” See: At Envestnet event, Sallie Krawcheck alludes to Crager alliance, blasts women-as-niche marketers and edges perhaps closer to endorsing the RIA model.

Now, Krawcheck counsels advisors to consider these types of funds, which have particular appeal to women and millennials.

Krawcheck’s speech had the well-rehearsed flavor of one who frequently talks at RIA-based events on a range of topics, but with an emphasis on women in financial services and their women clients. Krawcheck has consistently criticized advisors for not treating women clients with as much care and respect as their male counterparts. See: 6 things to consider when reading Sallie Krawcheck’s comments in interviews.

And, although Krawcheck has always been at pains to straddle the RIA or wirehouse debate, never directly addressing which channel is better, when she gives specific examples of wrong-doing by advisors, more often than not it is a wirehouse experience she describes. See: Why women just aren’t buying what financial advisors are selling.

'Lean’ and mean

In her speech, Krawcheck staked out some contrarian ground by critiquing “Lean In: Women, Work, and the Will to Lead,” Sheryl Sandberg’s treatise about women’s stalled rise to top positions in corporate America.

“I don’t think leaning in is the answer. The power of diversity is diversity. It is not taking diverse people and telling them to act like the majority.” See: Top RIA business executive recruiter chides 180 women gathered in a New York ballroom for second-guessing themselves.

Without offering up specifics, Krawcheck described her vastly different experiences at the major financial firms in the United States, saying the companies with the most diverse leaders were always most likely to respond best in crisis situations. See: Column: Advisors should be 'heroically available’ during a crisis.

Putting aside self-deprecation, Krawcheck said: “I’m the only person on the planet who has worked directly for seven financial services CEOs and I’ve seen all types of leaderships. It’s probably more like 12 leaderships with all of the turnover and the leadership teams that made the quicker decisions weren’t the ones where people finished one another’s sentences but the ones where the leadership team was diverse.” See: How Morgan Stanley and a lesbian super-producer came to grief in South Carolina and why she alleges bias.

Widows peak

Krawcheck also lamented the still-widespread shibboleth that women are a niche market. Women are the rule, not the exception, when it comes to clients and advisors who fail to realize this will lose business. See: At Envestnet event, Sallie Krawcheck alludes to Crager alliance, blasts women-as-niche marketers and edges perhaps closer to endorsing the RIA model.

Men tend to be happy with their advisors and are unlikely to move assets. Women, by contrast, are typically not as content and are much more likely to move assets. “It’s a mistake to treat women as a niche market,” she says. “There are very few 60-year-old white guys who don’t have a financial advisor, and in that group, their satisfaction is higher than their doctor. The growth rate in that category is by definition zero percent.”

Krawcheck commented that studies reporting that 70% of widows will leave their advisors are underestimating the problem. She recently lunched with an individual who runs a wealth management firm who said his widow attrition rate is even higher than that. See: How a suddenly wealthy, young Bay Area widow found her RIA after months of fruitless efforts.

“When I had responsibility for Merrill, I’d stand on a stage like this every quarter and we’d talk about outflows because of death without realizing this money is going to someone whom the advisor should know.” See: Why you won’t know your female clients are unhappy until they’re out the door.