New Tools to Help Women Invest to Meet Their Goals

When financial products or services are advertised as being geared toward women, I can't help being a bit leery. Are they patronizing? Is the advice dumbed down? Or do they offer something of real value that isn't otherwise available? As the financial-services industry sets its sights on trillions of dollars in investable assets controlled by women, a number of digital investing platforms aimed at women are in the works. My verdict: They're on to something.

The leader in this fledgling field is Ellevest, an online, computer-driven (or "robo") adviser whose CEO, Sallie Krawcheck, is the former head of Bank of America's Merrill Lynch division and has an impressive résumé of other Wall Street credentials. Rather than underestimating women, says Krawcheck, "Ellevest is one of the most sophisticated offerings out there." For example, its investing algorithms take into account that women live longer, their salaries peak sooner and they are more "risk aware." For women, she says, risk isn’t defined as beta or standard deviation; it means falling short of their goals. "Everyone claims to do goals-based investing, but it always comes back to 'large-cap value' versus ‘small-cap growth,' " says Krawcheck.

She contends that it doesn’t matter whether you beat the stock market indexes. What matters to women is whether they achieve their goals—whatever they may be—over a certain time period. At Ellevest, goals include not just "Retirement on My Terms," but also "Once-in-a-Lifetime Splurge" and even "Me"—a focus on building net worth. Based on client responses, current account balances and contributions, Ellevest's computers calculate how much you need to reach each goal, then use low-cost exchange-traded funds to build what amounts to a customized target-date portfolio designed to be successful in 70% of market scenarios—higher than the 50% likelihood projected by some financial advisers.

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An alternative approach. Goals-based investing isn’t the primary focus of WorthFM, another digital investment platform for women that’s in beta testing and is scheduled to go fully live next year. "We take a holistic approach to building net worth," says founder and CEO Amanda Steinberg. That might include adding to your emergency fund or paying off debt. The platform's "MoneyType" survey identifies how clients make decisions about money so that it can tailor its advice, including investments in five model portfolios. (The survey tells me I'm a "producer," which means I'm "grounded, diligent and consistent" in managing my money.)

One thing Ellevest and WorthFM have in common is an avoidance of standard Wall Street jargon (such as "beating the market" and "outperforming"), which they believe appeals mostly to men (Krawcheck calls CNBC "ESPN for stocks"). Rather, they've adopted a breezier, plain-English style. To illustrate risk, for instance, WorthFM explains that in 2008, when the stock market lost 37% of its value, a $10,000 investment would have dropped to $6,300, and it asks, "If the same events happened again, what would you do?" One pos­sible response: "Feel ill, but I'd wait it out."

Some features of the women-oriented sites are already being adopted by mainstream robo advisers. For example, Amerivest Managed Portfolios, TD Ameritrade's digital platform, em­phasizes goal planning with a 70% probability of success. "We are looking at what insights women bring that improve the investing experience," says Lule Demmissie, managing director for investment and retirement at TD Ameritrade.

When choosing any robo adviser, don't neglect the basics. Which approach appeals to you? Do you feel comfortable navigating the site? Do you value access to a human being either online or by phone? How much of a choice do you want among investments? And what’s the cost? Ellevest charges an annual fee of 0.50%. WorthFM, which has a $50 minimum investment, charges $2 per month for accounts under $5,000 and 0.50% once combined account balances reach $5,000.

As competition heats up, every investor has a better shot at finding an approach that appeals to her—or him. "Fifteen percent of our customers are men," says Steinberg. "They don’t even mind taking the personality test."