When she wanted to start Ellevest, a digital investment platform for women, Sallie Krawcheck approached several large banks for funding. She presented the concept, demonstrated the need and how large the market was, but nobody got it. After one such meeting, the CEO of the bank looked at her and said, "Well, don't their husbands manage their money for them?"In one comment, he encapsulated much of what is behind the lack of gender diversity in the financial industry. Women face stereotypes, doubt and biases from both within and outside the industry. But despite these psychological and financial hurdles, women are creating success in the financial industry. And they're teaching other women how to do it, too.Women Face Higher Hurdles Into the Industry When Catherine Berman and Yuliya Tarasava had the idea for CNote, an investment platform that uses technology to help people invest in a more inclusive economy, they entered in the 2017 SXSW Super Accelerator Pitch Competition. From hundreds of thousands of applicants, the judges whittled it down to 10 finalists. Standing alongside the other finalists onstage, Berman realized something: "Out of a global competition of fintech founders, we were the only women. Every other founding team was 100% male."CNote beat the boys to win the 2017 Best Startup Pitch Company award, but too often women in finance find themselves climbing an uphill battle to success. Women represent less than one-third of financial advisors and less than 20% of leadership roles in financial services firms globally. Women-owned businesses receive only 2% of venture capital in the U.S. The Ripple Effect of More Women in FinanceAs the gatekeeper to wealth, the financial industry is in a unique position to improve diversity by supporting women inside the industry and investing in women-owned businesses outside of it. Such efforts can have a wide-reaching impact."I've found again and again (that) when you support a woman entrepreneur, the effect of that goes far beyond just supporting her and her family," Berman says. "She ends up producing a series of positive network effects that also benefit the community, the local economy and the entrepreneur ecosystem."Berman and Tarasva are is proof of this: Since founding CNote they created The Wisdom Fund, a fixed-income vehicle that enables individual and institutional investors to invest their dollars in women-owned businesses. Likewise with Krawcheck and Ellevest, which is tackling not only gender diversity within the company but also the global gender wealth gap.Women have long been criticized for keeping more of their money in cash than men, thus missing out on investing returns, but "that research doesn't hold up," Krawcheck says.It's not a coincidence that an industry with fewer women does a poor job for women, Krawcheck says. She poses the question: Do you really think if instead of being 95% men, the industry had been 90% women, there'd be a CNBC?"CNBC was fashioned off of ESPN, (turning) investing into a sport," she says. "So the ripple effect here is tremendously important for our society."The Knight Foundation commissioned Harvard University and Bella Research Group to look into the diversity of the asset management industry. They found that women mutual fund managers represent less than 10% of the industry and manage less than 1% of total industry assets under management (AUM)."If we do the math, that means men are choosing the companies for 98% of our economy and look where we are," says Kristin Hull, founder, CEO and CIO of Nia Impact Capital. "The mess we're in was literally man-made, and until we can shift that lens to bring in more diversity, we're not going to get out of the problems we're in."How to Bring More Women Into the Financial IndustryImproving greater gender diversity in the asset management space isn't hard: It starts with choosing female-managed funds and investments that support women. To improve gender diversity in the financial industry more broadly, society needs to change the way it thinks. People have been socialized to view white men as leaders and everyone else as not, Krawcheck says. For gender equality to happen, inclinations to homogeneity need to change, she adds."There's an overwhelming draw to familiarity, to working with people like yourself," Krawcheck says. "Even people who are benefiting from the change can fight it because the drive to status quo is so powerful."She puts the onus for change on CEOs. If a CEO isn't committed to diversity, diversity won't happen. To that end, Krawcheck calls a full-stop on hiring if Ellevest becomes too homogeneous. They won't hire until they find someone who brings a different perspective and background. And before you ask: Yes, she upholds this policy even if the company becomes female-dominated.Hull takes a similarly firm view of diversity at Nia Impact Capital. The company is the first U.S. firm to be Gender Equity Now (GEN) Certified, which recognizes businesses that meet a standard of excellence across five areas of workplace culture including the gender perception gap, a certification Hull recommends all companies undertake."Even if you don't get full certification, you learn so many things that can improve your company practices," she says.But even the most committed CEOs can't hire people who don't apply. "Men are quicker to throw in their resumes than women are," Hull says. "Women are much more likely to apply when the hiring process is transparent."To encourage female applicants, companies should improve transparency, she says. Make the salary window available, let people know how many other applicants there are and, "of course, have women on hiring committees."Not only do women hire more women, but having a female role model when interviewing can be invaluable to women applicants.When Chrissy Lee, co-president and COO of Kalos Financial, interviewed for an operations position at Kalos 13 years ago, one of the first people she met was the company's co-founder and then-COO Carol Wildermuth."She blew me away," Lee says. "She presented herself with such confidence… Even in the interview, she was so open to sharing her background, her challenges, what she had to go through."Lee walked out of that interview thinking, "I want her job."As co-president and COO today, Lee is constantly trying to lift other women up in the field. "If I'm winning at something, I want other people to have that experience as well," she says.How to Be a Successful Woman in FinanceWomen must help other women rise, but you can't lift someone who isn't reaching up. If Lee had never applied to Kalos, if Krawcheck had never set her mind on creating Ellevest or Burman on CNote or Hull Nia Impact Capital, they never would have become the beacons of female success in the financial industry that they are today."It's not easy as women to be in this space right now," Berman says. "But the challenges can spark new thinking – and it's a battle worth fighting."Women shouldn't see the lack of diversity in the financial industry as a deterrent, but rather as an opportunity to pave the way for a better future for everyone.
small business
Starting your own business is scary business (pun wholly intended). When you work for yourself, everything depends on you: when you work, where you work; when you eat, if you eat. It can be a great psychological and caloric burden.The first year after financial planner Meg Bartelt started Flow Financial Planning was hard – "like, not-diagnosed-but-I-swear-it-was-a-nervous-breakdown hard," she says. Now three-and-a-half years in she reports that while becoming an independent financial advisor was stressful, it was also gratifying."One thing that became obvious very quickly was that being an advisor at another person's firm is entirely different from being the advisor in my own firm, where I am in charge of not only being the lead advisor, but also running the business," she says. "I now had two full time jobs: financial planner and business owner, and I'd only been trained in one."There's a lot of on-the-ground learning involved in becoming an independent financial advisor, but preparation can help minimize the stress and maximize the gratification.Steps to Become an Independent Financial Advisor: Have a financial cushion. Create a financial advisor business plan. Contact custodians and get legal counsel. Figure out where you'll get your clients. Recruit staff members. Build a support network.Have a Financial CushionBefore you take the leap to independence, "plan out how much revenue you need to live on and how much 'ramp time' you have with what you've saved so far," says Katie Burke, co-founder of Equita Financial Network.Bartelt suggests having two to three years' worth of living expenses covered, either through savings or a partner who also has an income. Even if you don't need all of it, just knowing it's there can be "a tremendous stress relief," she says. Financial Advisor Business Plan"Having a business plan is critical to your success as an independent advisor," says Eric Clarke, CEO of Orion. "A good business plan will really hone in on your value proposition and identify your specific niche."A financial advisor business plan may not resemble a traditional business plan, given the number of moving parts involved in the transition, says Rob Bartenstein, CEO of Kestra Private Wealth Services. According to Bartenstein, a financial advisor business plan should include: Mapping of assets from one platform to another. The infrastructure elements related to opening the office. Systems training for the entire team. Tech installation. Integration and testing. Review of the team's personal finances and preparation for income interruption. Acquisition of health care. Clarke suggests putting hard math into if you have the scale to go out on your own, too, before becoming an independent advisor. If you have less than $100 million in assets, his advice is to join an existing firm. "You need $100 million in terms of sustaining your business, and that level of assets lets you qualify as an SEC investment advisor, bypassing the hassle of registering in each state where your clients reside," he says."Make sure to think through how you plan to serve your clients while also running the business," says Bridget Venus Grimes, co-founder of Equita Financial Network. "It's also important to know that having your own RIA is not only expensive, but it also takes up a lot of your time — time away from clients, and time away from your family."Contact Custodians and Get Legal Counsel"Process wise, advisors should contact custodians right away to see what resources they can provide," Clarke says. You'll also want "competent legal counsel who has done this before." Experienced legal counsel can help you with your Form ADV to register with the SEC and state securities authorities, get your investment advisory agreements in place and navigate the transition to independence without violating your current firm's rules, he says.Finding and Retaining ClientsOne of the biggest pitfalls Bartenstein sees for financial advisors starting their own business is not pursuing their existing clients enough during the transition. "As a departing advisor, you have to be prepared to share your vision, help clients understand what's in it for them, and diligently work to communicate," he says. To do this, "work with partners who have experience with moves like yours, from firms like yours, and who have a demonstrated track record of helping people succeed."That said, maintaining client relationships from your old firm isn't the only way forward. Bartelt started from scratch when she began Flow Financial Planning because she knew she wanted to target a different demographic, namely women in their early-to-mid career in tech. It made the first year slow but "ultimately was a blessing because I could grow a refined group of clients from the start," she says.Staffing Your Financial Planning FirmStaffing can also be a challenge for advisors starting their own financial planning firm. The problem the team at TD Ameritrade Institutional uncovered in a recent survey of more than 2,000 advisors, students, career-changers and university program directors was that many job seekers don't even know the RIA career exists. "Only 37% of students and 44% of career changers (surveyed) knew what an RIA job was, which demonstrates how crucial it is to increase visibility," says Kate Healy, managing director of Generation Next at TD Ameritrade Institutional. "Some of the ways to do this include becoming an ambassador, connecting with local university program directors, signing up to be an adjunct professor, joining networking groups and introducing the profession to students early on."She also suggests offering internships, diversifying your hiring program and encouraging candidates from different educational backgrounds to apply. "Some of the best RIAs didn't study finance so try to think outside the box and consider candidates with majors like sociology and education," she says.Independent but Not AloneBecoming an independent advisor can be the most rewarding career move you make, but it can also be the most daunting. The good news is you needn't do it alone.Many advisors feel "they need to stay at their firms to preserve their network of clients and peers," Clarke says. But there's a whole other network of support available to independent financial advisors through industry associations and conferences.For Bartelt, joining the XY Planning Network (XYPN), an organization of fee-only financial advisors specializing in Generation X and Generation Y clients, was essential. "I never considered myself an entrepreneur so starting my own business didn't particularly appeal to me, and when I decided to do it anyways, it scared the pants off of me," she says. "XYPN stepped in to mostly fill in the holes of what I needed to do, and to help me do it."Your support network can be industry associations or individual coaches and friends who allow you to share best practices."When you decide to go solo, you likely won't have the daily comradery you may be used to at a larger firm, at least not right away," Burke says. "So, having other like-minded planners to reach out to is important for your sanity; you can tap into their expertise for advice on everything from client cases, to running your business, to managing family and business."