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Cassandra Toroian Of

01/26/01 04:02:10 PM PST
by David Penn

Cassandra Toroian is president and chief executive officer of, an online bank, brokerage, and educational resource designed for women. She developed the idea for after recognizing that women need to learn more about finances and investing, and to be guided toward actually doing something with that education once they get it.

Before Toroian started, she was a sell-side analyst at Ryan Beck & Co. and Emerald Asset Management, specializing in small- and mid-cap banks. There, she was frequently sought as an expert on bank stocks by publications such as The Wall Street Journal and The New York Times. Now she's using her expertise to help other women succeed. Working Money Staff Writer David Penn interviewed Toroian via telephone on November 17, 2000.

I view money and investing for women as the last frontier of social equality. They've come so far in terms of managing their careers and contributing income to their households, but the last step is really, are they handing their paycheck over to their husbands when they get home? -- Cassandra Toroian

When did you first start thinking about launching I got the idea in summer 1999. At the time, I was an analyst. I was watching CNBC one day after I got home from work, and they were featuring this guy who wanted to become a daytrader. They showed a week in his life of learning how to be a daytrader, in a daytrading facility in the middle of New York City. What struck me was there were no women at that place. That's when I realized that women aren't daytraders. There are some women out there in the financial world, but they're not daytraders. The whole environment of an operation like that probably intimidates most women.

I realized that women need a place of their own to learn about finance in a nonintimidating environment. What better place to do that than on the Internet? So I started looking around to see what was out there. At the time, all I could find was the money section of two women-oriented websites, and iVillage. While they're okay in terms of some of the content, you're not really sure who's writing it. Even if you like the content, there's no way you could actually execute a strategy with the knowledge you're getting.

I was from the brokerage industry, so I thought, well, let's put this together. Let's put educational content and learning and tools ahead of the execution capability, but let's have the execution capability also. That way, you can manage everything in one location, including banking, which makes it a time-saving application. And that's how evolved.

I actually started the company a year ago this week. We launched the initial version of the site in February 2000 and we launched the current version in May 2000. The bank section of the site went live in August, and the brokerage went live two or three weeks ago.

When you first started thinking about Financial-muse, the idea came from the absence of women in daytrading. Was that the initial emphasis? Did you move onto the Internet to provide something on that limited scope and then it became broader? I had thought about doing something for women who daytrade. As I started to research how women view money, though, I realized that wasn't the right approach. That would be a very small niche. Daytrad-ers, whether they're male or female, have different needs than mainstream investors. Since I wanted to appeal to more of the mass market, I just didn't think it was a good strategy.

I also looked at my own life. When I came up with the idea, I had just turned 27. I'm not wealthy, although as an analyst I have high income potential over the next 30 years. I thought, well, where could I go to do this stuff for myself? A lot of the brokerage firms we hear about, like the Merrill Lynches of the world, don't want to take you on if your account isn't over $100,000 to open with. I wanted to create something that was accessible to every woman. That's why Financialmuse doesn't have a minimum to open a brokerage or bank account.

I also realized that I didn't want to call the site for women only. Only about 20% of women do business exclusively with women. You know -- the kind of woman who thinks, "If I'm not buying a car from a woman, I'm not going to buy a car." The other 80% just want to make sure it's a good product and whomever they're going to for that product or service is knowledgeable. That's how we created the site. We made sure it was full of good tools and information and had a woman's feel to it, but it wasn't exclusive. That's why our name doesn't have the word woman in it. We wanted it to be accessible to men as well. Women don't live in boxes; they have significant others. We wanted them to feel comfortable using the site.

Have you observed a significant gap in the approach that men and women take to the Internet? Yes, it is pretty significant. Women now outnumber men in terms of the percentage of Internet users out there. It crossed over some time last summer. Women in the real world, offline, are browsers. They know they need to buy a new dress, so they go out and shop at three different stores, look at 10 different dresses, and then decide on one. Men are the opposite. They know they need a shirt; they go buy a shirt. On the Internet, it's totally opposite. Men really do browse the Internet. They are web surfers. Women, on the other hand, use the Internet as a time-saving tool. They aren't big-time surfers. As we built the site, we took that into account.

How did you incorporate your findings into the creation of your website? Toddi Gutner wrote an article about us in BusinessWeek. She commented that the site was easy to navigate. We worked hard on that. We wanted people to be able to get from the front page straight into their bank or brokerage account with one click, so it's a time-saving tool. The other thing, too, is just in terms of the look and feel. Women don't like flash, they don't like audio, or all these moving animation things. They view it as a distraction. Although a lot of women are on the Internet, it doesn't mean they're necessarily using the latest and greatest web browser, so a lot of those functions won't work for them. Again, we built the site to be simple. We used the best possible low-tech approach we could, in terms of making it look nice and easy to navigate. We didn't use the newest language out there because it might not work on the average user's version of Internet Explorer.

There are several sites on the Internet where people can retrieve financial information. What are some of the things, both for men and women, that set Financialmuse apart? A lot of those other publications assume everybody who reads their magazine has a certain level of knowledge about their subject. But if you're a novice and you pick up Money magazine, you might not understand all the terminology they're throwing around. That's why I was happy to hear what Working Money is doing.

We have an investment basics section, which assumes, essentially, that you know nothing. It walks you through different lessons about topics like stocks, mutual funds, budgeting, 401(k)s, and so on, and it has a glossary. We don't want to appear to be dumbing down information, but if you don't know anything, you can come here and learn. And as you grow more comfortable with the subject, you can graduate to opening an account with us to act on what you've learned. We also have an asset allocation model. You answer 11 questions and submit them and you will immediately see a piechart showing what your portfolio should probably consist of in terms of cash, stocks, and bonds.

What about content? How is that different from other sites that provide financial information? If you look at the list of contributors for our site, we don't really use writers per se. We use people who have financial backgrounds or have some kind of specialty. For example, we have a woman who writes about bonds for us. She manages a fixed-income portfolio. Every week, she writes about the basics of bonds, because that's an area a lot of people don't understand. We have some real estate agents who write a weekly article about real estate. Younger women are probably the fastest-growing market for new homebuyers, because more and more young women aren't getting married, but they want to own their own home.
So I thought it was important to have some lessons about real estate.

We also have a Q&A written by a woman who is a high-profile financial planner from Boston. People send questions to us, she answers them, and we post the answers in a section called "Never Be Afraid To Ask A Question." We have a man who writes for us, actually, who has a doctorate. He's spent the last 15 years researching the topic of women and money, and how women view money psychologically and behaviorally. He writes articles on everything from caring for elderly parents to college funding, written in a tone that's appropriate for our audience. I think because we're so targeted, we can take a friendlier tone in our articles, versus the way more generic publications write. That sets us apart. We've had extremely positive feedback about that.

You mentioned the brokerage service, which is only two weeks old, and the Financialmuse bank. Could you tell us a little bit about each? Sure. On the bank side, there's Again, I was a bank analyst, so it's kind of cool for me to be able to create a bank. In both cases, we've tried to create products that are specific to our audience. For example, we bill ourselves as the first online bank created for women. We've resurrected some products that a lot of banks got rid of, such as holiday clubs and vacation clubs. We did that because women like to compartmentalize money, and there's nothing wrong with that. A lot of banks did away with that because they thought it wasn't worth their while.

We also have a caregiver's account. A lot of women take care of an elderly parent or somebody in their life who needs help. The caregiver's account recognizes they might need access to that person's money to properly take care of them. Maybe they're too sick to sign their name. Maybe they have Alzheimer's. We've tried to create and resurrect products that recognize that women have different needs because of all the hats they wear.

We also have Minimuse bank accounts, which parents can open for kids. We're developing some educational material that will make it possible for a parent to sit down with their child at the computer and go through stories to teach them about money and saving and that kind of thing. Women often see their goals through how they view the people they care about in their lives. They want to make sure they're taking care of everybody around them.

And on the brokerage side? On the brokerage side, I think it's true that a stock is a stock and a bond is a bond. There's not much we could do there. But we are emphasizing, especially for novices, the fact that people need to take the plunge and get involved with investing. One thing we have, and we're the only brokerage that has this, is a return policy.

Tell us about it. I guess some could say that it's just a marketing spin, but I think while that's true to some extent, it's also recognizing that as a novice investor, you might not be sure of what you're doing. We want you to feel comfortable. If you buy a stock and decide within the first 30 days that you don't want to own it, you can sell it and get out, commission-free. We're not going to take the loss, obviously, but I think it gives people who are new to investing a certain comfort level.

We are also offering a gift brokerage account. You can give somebody a brokerage account for Christmas, or Hanukkah, or any other holiday, so you're helping empower a woman or man in your life who you think needs to start investing. You fund the account initially for them and there's some paperwork they need to do on their end, but again, I think it's something different. Nobody else is doing that.

We are also offering gift brokerage accounts that can be given at any time of the year for any special holiday or anniversary or birthday, especially for kids. You can open a brokerage account for your child as a gift for a birthday or some other occasion. You give us a list of e-mail addresses of other people in their lives -- grandparents, godparents, aunts, uncles -- and we'll send those people an e-mail letting them know that you've opened this account and if they would like to contribute to it, they can do so.

We've tried to do things differently, and I think we're succeeding. The people who are coming online now for their financial services are mainstream investors. They're not daytraders. And these are people who are looking for thoughtful products.

You've talked a lot about people who are just getting started investing. What are some of the misconceptions new investors have about setting up brokerage accounts and taking care of their own investments and finances? There's a company in Oregon that puts on free, one-day conferences called "Everywoman's Money Conferences" for women throughout the country. Usually about 1,500 women attend a day. Basically, they are meant to help women who want to get started. I'm on their empowerment team -- a group that travels with them and teaches various classes throughout the day.

One of the classes I teach is on financial websites. I always open by talking about Internet security. As an online brokerage and bank, we have noticed some hesitation. People want to know if it is really safe and secure. The other question we hear often is, "If I choose to go through a broker, how do I know I can trust them?" There's a big trust issue for a lot of novices, and women, more specifically, who are novices. They know they need to do this, but they also know they want to go to somebody they can trust. That's a big step for a novice.

A lot of people think, "Oh, I don't have enough money to invest," or "I don't know nearly enough to do this successfully." Other people think they'll start with nothing, and somewhere near the end of the line they'll have a million dollars. How do you help people understand what the process actually involves? Through our website, we're trying to get people up to speed. People also have to do a certain amount of investigation and learning on their own. I met with a woman last week who is very successful. She's highly educated, in her late 30s, has a brokerage account -- but she admits she really knows nothing about how to manage her money and investments. I can't make a house call for everybody, I'm too busy, but she was a friend of a friend and a colleague of mine. So we sat down and went over basic concepts, and she took notes. She said at the end, "I'm going to go to your website and keep reading." There has to be an inner admission of what you have to do, I think. That's really the first step. Admit to yourself: "I don't know anything about this. I have to proactively learn." It's almost like saying, "I need to lose 10 pounds and I've got to get my butt out of bed every morning at 5:00 to go to the gym." It's the same thing.

Elsewhere, you've mentioned the concept of financial empowerment. Would you agree that taking these first educational steps is part of empowerment even more than having the money? I think the word is overused. But yes, I view money and investing for women as the last frontier of social equality. They've come so far in terms of managing their careers and contributing income to their households, but the last step is really, are they handing their paycheck over to their husbands when they get home? How involved are they with the money decisions in terms of long-term investments? While they might be an integral part of decisions when it comes to the car they buy or the house they live in, a lot of women still aren't involved with long-term investment planning decisions. Everybody needs to realize they want to change that. That is the first step to becoming empowered, to learn about this stuff.

You have mentioned, and I have read in other publications, that women tend to be more conservative about investing than men. Do you have some ideas why that might be the case? I think women are more conservative. When they do invest, they take a longer-term view than men do. They are more apt to buy and hold for a longer period, which is why when they do these studies comparing men's portfolios against women's, the women outperform men slightly. When it boils down to it, women just aren't paying as many transaction fees.

What's interesting is that women who do invest, especially women with high net worth, spend an average of almost nine hours a month researching their investments and going over their financial situation. Because they are more conservative, they want to make sure they know as much as possible about the investments they're going to buy. I think sometimes men shoot from the hip a little more when it comes to buying a stock. If they get a tip from somebody, they're more apt to buy the stock just from that tip than a woman would. A woman might get a tip and say, "I'm going to watch that stock for a while." Then maybe she'll buy it, but she's not going to buy it first and then research it.

At Financialmuse, I found articles that didn't seem to be related to finances. For example, I noticed an article on carbon monoxide, of all things. How does that information bundle in with the overall projects? When you talk about financial empowerment, investments are just one part of your money life. There are lots of areas where women can save money to invest. If you save $100 more every month because you're doing some things that you would have had to pay somebody else to do for you, that $100 can go into an investment account and earn money. In my travels, I met a woman who had written a book called Renovating Woman: A Guide To Home Repair, Maintenance, And Real Men. The book teaches women how to do home improvements for themselves to save money. I thought it would be a good thing to include on the site. Maybe it's not investment ideas per se, but it fits into the whole concept behind the site of teaching women how to be more independent and manage their whole money life. That's why it's there.

It seems to me that women have caregiving responsibilities later in life, after they have established careers, more often than men. They might have to take care of a parent or an older relative. Do you think women underestimate how much money they will need later in life because of the additional responsibilities they tend to take on? Is that something women need to be concerned about? I don't have any hard data on that. I think over the past 10 years or so it's been more publicized that women are really the caregivers, and I think a lot of women are realizing it falls on them. Younger women, especially, are realizing that Social Security isn't going to be around for them and they need to do something for themselves. Traditionally, women have always been the caregivers. Maybe I think that because of my own ethnic background. I'm Greek, and that's just the way it is. It falls on the daughters a lot of times, or it falls on the eldest son's wife, quite honestly. It's just part of our society. I think most women realize that.

What most women don't realize, or maybe they do subconsciously but haven't verbalized it, is they live longer than men. The average age of widows in this country is 55, so women are going to have 20, maybe 30 years on their own. When they verbalize that, I think that's when they wake up. We want women to take a proactive approach. Don't wait until you are getting divorced or your husband dies to find out what's going on with your investments, or to start learning about finances. Be proactive.

Given some of the things we've talked about in terms of women and money and this last frontier, it seems ironic that you are not just an analyst, but a banking analyst. How did you first become interested in finance? I was always interested in the stock market, even when I was young. My mom helped me buy my first stock when I was maybe 10 or 11. It was a bank stock, actually.

How did you do? I think the bank eventually got bought out.

Well, that's not too bad at all. It was kind of strange because while I was really interested in finance, I also thought that in order to get involved in that business, I would have to be a broker, which I didn't want to do. At the same time, I was interested in law. I had always planned to go to law school. When I graduated from college, I got a scholarship to law school and started there. But I found myself coming home from my classes every day and flipping on CNBC. I learned a lot just by doing that.

Halfway into my first year of law school, I decided that after I finished my law degree I was going to get my master's degree in business administration (MBA). I didn't know exactly what I was going to do with it, but I knew I wanted to learn about investments and finance. At the end of my first year of law school, I was studying for my finals -- which is a hellish process, really awful --and this lightbulb went off in my head. I was going to drop out of law school and get my MBA. I didn't want to go through this hell for another two years and then go get my MBA. It was a waste of two years, I thought. So I did just that.

That was a bold move. I knew I wanted to be involved in investments, so I specialized in finance. I worked at Merrill Lynch International Bank while I was getting my MBA, in their private banking section for Latin America, because I was in Miami. That's when I realized I didn't have to be a broker. I didn't have to be a financial planner. I have always been good at picking stocks on my own, and I could make that my profession. That's how I got involved in finance.

How did you end up as a bank analyst? I fell into being a bank analyst. It so happened I was going to work for a mutual fund company in Pennsylvania, and they were looking for a bank analyst to focus on mid-Atlantic and Pennsylvania-based banks and financial companies.

The funny part was, when you go through business school they teach you how to read the balance sheets and income statements of companies. But banks? Banks are totally different. Their balance sheets are the complete opposite of any other company out there. So I took my time. I took a couple months and learned everything I could about the banking industry, the right ratios to look at, the key things to focus on, and with the help of the portfolio managers, I really taught myself what the right criteria were when analyzing a bank. And I was good at it. That was really exciting to me, because I was so worried in the beginning. I was used to analyzing Internet companies. I mean, I bought America Online (AOL) in 1995! I was used to looking at companies that work differently from banks.

A lot of the stocks I recommended did well, either on their own or they got bought out, so the company made really good money from a lot of the things I put them in. Then I moved on to another firm and did well there, also. It just happened that I came up with this idea for and thought that I was young enough to take the chance of starting an Internet company, and if it didn't work I could go back to being an analyst, because I really do love being an analyst.

For our readers who are looking at bank stocks to purchase, can you point out a few basic things they might want to pay attention to? In terms of valuation criteria, and this applies to all companies but it's more focused for banks, one factor they should pay attention to is the price-to-book value. Bank stocks are a good way to go for a value investor. They are somewhat cyclical, although I think the industry has moved away from that in recent years.

You want to buy stocks that are probably trading under, at this point, one and a half times book value. There is still going to be quite a bit of consolidation going on in the bank business, so if you're looking at it from that point of view, obviously the valuation for buyouts has come down over the past two years. A couple of years ago, it wouldn't have been unheard of to see a bank get bought out for three and a half times book value. I think valuation has come down, so if you're going to buy on that basis, I wouldn't pay more than one and a half times book, thinking that maybe it would get bought out at two and a half times book.

On the price-to-earnings side, I would look for stocks that are trading under 10 times earnings. Again, because there is a certain buyout P/E ratio to be expected, and I can't see that at this point it would be more than probably 15 to 20 times earnings. I think you should look at return on assets and return on equity as well as earnings growth. In this type of economy, I would hesitate to buy bank stocks that are still growing earnings in excess of 15% a year.

Really? Yes, unless they were doing something differently. Unless they got into a new business or they had a large trust department or investment department that was bringing in lots of new accounts. If they're growing earnings at 15%, it means they're probably bringing in some pretty risky loans at this point in the economic cycle. That's something else I would look at. How much is their loan portfolio growing right now on a quarter-to-quarter basis? Is it growing 3% quarter-to-quarter? Is it 5%? I would be a little hesitant about anything more than 3%.

Right now, we're hearing about how the traditional role of banks has been changing. What are some of the most significant changes that banks are undergoing? Is online banking one of the major changes? Yes. I think even the bankers I keep in touch with are still trying to figure out if online banking is a separate business for them or just another distribution channel, and how much they want to invest in building out that business. If it is a distribution channel, what's the return on the investment they need to see in order to commit to it? Online banking is a great product, but I don't think society has truly caught up to it yet, much like automatic teller machines (ATMS) back in the late 1970s and early 1980s, I guess.

You mentioned that Financialmuse is looking at issues of security and trust. Do you think those are issues that online banking as a whole will have to deal with? Definitely. I think any online bank has to deal with those issues. Depending on who your target market is, you have to do a certain amount of education, like a how-to guide. You have to teach people how to transfer money, what buttons to push, that kind of thing. You also have to explain how you're ensuring security on your end and what the customer can do to ensure security on his or her end.

There's also the general issue of bricks-and-mortar versus an online bank. Many people still want the comfort of being able to walk into a bank branch. A lot of banks, a couple that I can think of in particular, are shrinking their bricks-and-mortar presence. They're cutting down the operational expenses of having 50 branches. Maybe they're selling some, shrinking down to 20 branches, and heavily marketing their online bank. I think that's a good strategy as well. The younger generation sees the value of having an online bank account because it saves time. You can do a lot of things with an online bank account that you can't do with a bricks-and-mortar account, like paying your bills. It just takes a while for society to catch up with technology sometimes.

You've spoken about helping other women. Elsewhere, you've referred to Betsy Cullen, who founded Jefferson Bank, as a mentor. How did she help you when you were coming up? Betsy has been a tremendous help, friend, mentor -- all of those things. Jefferson Bank was one of the bank stocks I had followed, and I'd known Betsy for several years. She started Jefferson as a women's bank in the early 1970s in the Philadelphia area. Over time it evolved into a community bank, although it was always very much involved with helping women and women business owners.

When I had the idea for Financialmuse, I called Betsy to ask what she thought about it. It sounded like a good idea to me, but I wanted to get the opinion of somebody whom I really trust and believe -- somebody who has been down a lot of these roads herself. Her first reaction was: "It sounds like a good idea. Let me think about it a couple days and I'll call you back." That's how we started. She's actually the chairperson of our company.

It's a promising start. Thanks for talking with me, Cassandra.

David Penn

Technical Writer for Technical Analysis of STOCKS & COMMODITIES magazine,, and Advantage.

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