Last week, Black leaders, investors, business owners and entrepreneurs from around the U.S. gathered in Tulsa, OK to observe the 100th anniversary of the Tulsa Race Massacre, one of the most devastating race crimes in the history of our nation. I traveled to Tulsa to participate in Economic Empowerment Day, a summit co-hosted by Eric Stevenson, President of Nationwide Retirement Solutions.
The goal of Economic Empowerment Day was to create a focal point for the national conversation on the racial wealth gap and focus on the ongoing disparities for Black business owners, investors and individuals.
The economic power of Black Americans is rising—Black-owned businesses are thriving and Black consumers possess over $1.4 trillion in buying power.1 But there is much more work to be done to close the gaps in income and wealth between Black and white Americans and provide a more equitable path for Black families to achieve financial security.
A matter of trust
Black Americans come to financial planning from a different place. The majority of Black households are risk-averse; 55% say they are unwilling to take any financial risk when saving and investing.2 Black consumers also tend to express higher levels of general distrust, with 61% reported low levels of generalized distrust.3 For white consumers, this number is 32%.4
These are high hurdles to get over to help more Black households plan for a secure financial future, but progress is possible when we start with understanding. Black consumers are more willing than white consumers to engage in “specialized trust”; that is, trusting in people they perceive are “like them”. Recruiting higher numbers of Black financial professionals would help build the kind of trust that’s necessary in financial planning.
There’s also an opportunity for both Black and non-Black financial professionals to build better bridges to minority clients. It involves effectively communicating with empathy, sharing and listening to the different perspectives, priorities and life situations of diverse clients.
What is your why?
This is the question I ask whenever the topic of financial planning comes up with friends or family members. It usually prompts a deep discussion that goes beyond the role that money plays in our lives. We end up talking about the dreams and aspirations we want to accomplish for ourselves and our families, and the legacy we want to leave to future generations.
My interest in this topic comes from my own story. Growing up in Detroit, I was surrounded by a family of entrepreneurs. They blazed their own paths to success and financial security, but what was missing was the transfer of wealth to the next generation.
My personal experience serves as the source of my why—as a financial professional, I want to push the dialogue among Black families to focus more on wealth creation and change the trajectory to Black wealth going forward so it may serve to benefit our children and our children’s children.
It’s time to get real
The wealth gap between Black and white households is a significant problem in the U.S. and we need to get real about fixing it. The Federal Reserve’s Survey of Consumer Finances shows that only 35% of Black families had retirement accounts in 2019, compared with 57% of white families. Even among Black families who did have retirement accounts, the median account value in 2019 was $35,000. Among white families, that value was $80,000.
We have the chance to create awareness and help more people take action to build financial security, especially when it comes to retirement. It’s an important step toward building stronger legacies and generational wealth. But financial planning needs to be practical and actionable. As financial professionals, we tend to jump ahead to the solutions instead of stepping back to have holistic discussions with clients and the families about building and transferring wealth.
When we talk about building wealth around our goals and dreams, these discussions can seem to be too abstract to be real. So how can we make holistic financial planning practical and actionable? Here are three steps to consider:
- Make a plan—Putting your goals in writing is a great way to make them real. And once these goals are real, you can start to act on them. When we make a plan, we often focus on future outcomes—mostly retirement, but also other longer-term goals. Planning for the present is also important. When we feel secure about the present, we have a foundation to build on for planning for the future.
- Talk about it—Money can be a taboo topic among friends and families. In fact, one study found 68% of people would rather talk about their weight than their savings.5 We need to normalize conversations about money, which means focusing less on the dollars and more on the security and legacy money allows us to create for ourselves and our families. Within Black families, there is a noble responsibility in taking care of older and younger generations. Everyone should be involved in this discussion, whether it’s planning for long-term care for elders or preserving wealth so it can be transferred to our children.
- Prioritize retirement with the day-to-day—When we get absorbed in the tasks of everyday life, planning for retirement can get lost in the shuffle. Especially for young adults, retirement is so far down the road that it may not seem real. Plus, when we have more immediate financial priorities, planning for the future is easy to push aside. But starting to save and invest for retirement as early as possible is important because it puts the power of compounding on our side. In looking at participant data from our retirement plans business, we see the average age that people start planning for retirement is 31. That’s good, but starting a few years earlier could make a big difference in the outcomes workers achieve at their retirement.
Resources to help build wealth
Nationwide is committed to simplifying the financial planning process for financial professionals and their clients. Through the Nationwide Retirement Institute®, we offer insights, tools and consultation to bring clarity to the complexities of financial planning.
Nationwide has created several resources to encourage productive conversations about personal finances and promote favorable outcomes for clients and their families. To help Black families and investors close the wealth gap, check out the following resources:
College Funding Calculator—This tool can help students, parents and other guardians estimate how much money they may need to save to cover higher education expenses.
My Interactive Retirement PlannerSM—Clients can set hypothetical goals and calculate how much to save, taking into account the different factors that can influence retirement outcomes.
FreeWill—Sponsored by Nationwide, this free service allows clients to create a simple will to cover wealth transfer to the next generation.
My hope is for Black families and individuals to take these resources and share them with others in the community to help foster greater participation in financial planning and more investment in wealth creation and preservation. I believe in the quote that says, “Tomorrow belongs to those who prepare for today.” Through education, conversation and planning, we can take the necessary steps to control our financial situations today so we can bridge the wealth gaps and help others realize a more secure financial future.