This year during Black History Month, we’ve highlighted the connections between wealth and wellbeing among Black consumers, with a focus on raising awareness around the persistent gaps in financial planning and the links between financial health and personal wellbeing.
As professionals in the financial services industry, we know that financial wellness and resiliency also play an integral role in the overall wellbeing of clients and their perception of security. That’s why this February we’re directing the conversation with financial professionals toward bridging the wealth divide and fostering better financial health among Black consumers.
Stressors between health care and wealth
As a place to examine the connections between financial and personal wellness, we only have to look back to 2020 and the start of the COVID-19 pandemic. Many people were affected by the virus in different ways – physically, emotionally and financially. For many Black Americans, the impacts of COVID-19 were particularly acute. A Nationwide Retirement Institute® survey from earlier this year found the majority of Black Millennials (57%) felt they had been negatively impacted by financial stress during the pandemic. These numbers were lower but still significant for older generations of Black Americans; 46% for Black Gen Xers and 27% for Black Boomers. Moreover, one in five young Black adults said that financial stress had impacted their overall health.
What’s stressing Black Americans when it comes to financial planning? The same survey polled Black Americans across different age cohorts to discover specific stressors about retirement. Among Black Millennials, Gen Xers and Baby Boomers, inflation and rising prices ranked highly as either the first- or second-highest stressor. Worries about Social Security funding, rising health care costs and higher taxes also scored among the top stressors Black Americans have about planning for retirement.
Bridging the financial gap
Roughly 1.28 million Black adults have lower levels of access to financial services, including banking and lines of credit.1 In addition, there is an overall opportunity to increase financial literacy.
That said, there is a unique opportunity for financial professionals to support the financial goals of Black Americans. Black American buying power is on the rise due to increasing education levels, Black-owned businesses and employment.2 We also see the U.S. population experiencing growing racial and ethnic diversity. According to the U.S. Census Bureau, the U.S. population is expected to become majority minority in 2045.3 This represents a clear opportunity to forge a path to economic equality and empowerment for Black consumers. Providing the necessary education and guidance is critical to this effort.
Financial professionals can lead the way by encouraging Black Americans to save early and invest in tax-advantaged savings vehicles and protection products. Providing culturally relevant financial education about the social and cultural impact of wealth building and wealth transfer is imperative. Financial professionals can make significant inroads with Black consumers by delivering support and advice that is both transparent and respectful.
In fact, these are the top two characteristics Black consumers look for when choosing to work with a financial professional. A different Nationwide Retirement Institute® survey conducted at the end of last year found that transparency and respect are the foundation on which financial professionals can inspire trust among their Black clients. See more insights from that survey about reaching Black consumers.
Building trust is so important. In general, Black consumers have lower levels of trust than white consumers. As such, they are more likely (70%) than white consumers (40%) to interview multiple financial professionals before deciding on one, according to our survey. In fact, more than one-third of Black consumers interviewed more than four financial professionals during their search. Financial professionals should be aware of the necessity to build trust early in the relationship and seek common ground on which to build a strong connection with potential clients starting with the initial meeting.
Building solid connections from day one
The good news is, opportunities abound for financial professionals to create solid connections with current and prospective Black clients and improve overall financial wellness by providing guidance on specific needs.
Our survey found that the #1 financial goal for all Black consumers is saving for retirement. After that, priorities differ, especially when comparing those consumers who have working relationships with financial professionals and those who don’t. The top five financial goals of Black consumers with an existing financial professional relationship are:
- Saving for retirement (61%)
- Not outliving their savings (39%)
- Leaving a financial legacy (39%)
- Building an emergency fund (34%)
- Paying off debt (32%)
Among Black consumers without a financial professional, their top five financial priorities include:
- Saving for retirement (70%)
- Building an emergency fund (57%)
- Paying off a mortgage (47%)
- Paying off debt (46%)
- Not outliving their savings (42%)
The guidance financial professionals provide is vital to building confidence with Black clients while fostering a sense of financial wellbeing. It’s even more important because half of all Black consumers feel their overall financial situation is not better off than previous generations.
In addition, when compared with non-Black clients, Black clients are more likely to have a written retirement plan, but less likely to have a legal will. This data is further evidence than financial professionals—indeed, the financial services industry as a whole—have much more work to do when it comes to bridging the wealth gap and helping to orchestrate generational transfers of wealth among Black consumers. Being proactive about financial planning and helping Black clients achieve their goals can only serve to improve the financial health and strengthen the stability of Black communities.
A Vital First Step
Financial wellness is an area where Black Americans have not historically fared well. In general, access to financial education, banking, lines of credit and income stability is lowest for Black men and women.4 Nonetheless, the tide is turning, as Black consumers’ income and savings continue to grow and they turn their attention to building wealth and legacies for future generations.
This demographic is an under-served market. However, they are ready and willing to embrace financial guidance and solutions. As such, financial professionals can—and should—focus on building strong relationships with Black consumers to help them improve their financial wellness, close the racial wealth gap and create legacies for future generations. Together, we can change the trajectory of financial stability and security in Black America.
Creating economic and wealth equity starts with the need for more Black financial professionals in client-facing roles as advisors and representatives. This is particularly critical because a majority of Black consumers (53%) want to work with financial professionals who share their racial background. Still, this desire doesn’t always play out in practice. While 61% of Black consumers currently working with a financial professional want to work with one who shares their racial background, only 38% actually do so (compared with 71% of Black consumers).