I'm often asked to speak to women about investing. And for years, I've typically started with the basics of saving, diversification and asset allocation, and then moved to discussing how some women should consider taking on more risk to increase the returns needed for their longer-than-men's lifespan.
But, before getting to that, there is an investment that women can make that has by far the greatest risk-adjusted return available.
And that is asking for a raise.
Women today earn less than men, with the often-cited figure of women making 77 cents for every male's dollar. And this discrepancy starts from the first job, with men negotiating their salary from the get-go while women, on average, do not.
Looked at another way, if a woman were to earn at parity with a man, that represents a return of 30% per annum on her current salary.... which compounds. (!) One can't get that return on government bonds (now yielding in the low-single-digit-per-cents) or in the stock market on a consistent basis (even in the bull market since the crash, the U.S. market has returned less than half of that annually).
Yes, asking for a raise is fraught, and gender challenges abound; indeed there have been best-selling books advising women on how to ask for raises. (Cliff Notes version: Be fact-based and unemotional, and don't apologize for asking or run on for too long.)
I often relate how, during my years in management, some good number of my male direct reports would come into my office toward the end of every year, telling me how much they felt they deserved in a bonus payment. I never had a woman initiate a similar conversation. The man's request was almost always more than we were planning to pay him... and typically by some good measure.
What can happen when the gentleman asks for a raise and the woman doesn't?
Let's assume Joe and Joanne are both highly valued employees, they have the same job, they are achieving at the same level and they have the same professional runway. They are both penciled in for raises of $5,000. Joe communicates that he believes he deserves $10,000; Joanne doesn't say anything.
Well, when it comes time to allocate out bonuses and raises, how much will the boss pay Joe? The answer? Perhaps not $10,000, but likely more than $5,000. After all, he's highly valued, and one doesn't want to disappoint him too badly.
Joanne? At best, she is paid the $5,000. At best. And, more likely, she is paid less. After all, just because Joe makes more doesn't mean that the pool for raises goes up... and it has to come from somewhere.
No, this isn't right. And it isn't fair. And it should change. And the smart companies should and will recognize this and close this gap.
In the meantime, ladies, please ask for the raise.
Sallie Krawcheck is the Business Leader of 85 Broads, the professional woman's network. The network is 34,000-strong, with members from across industries and around the world.