Jamie Kalamarides is president of Prudential Group Insurance. He recently jumped on the phone with PLANADVISER for a frank and engaging Q&A focused on the results of his firm’s recently published Financial Wellness Census.

As Kalamarides discusses below, responses to the census survey are eye-opening in a variety of ways, coming as they do during the nation’s and world’s fight against the coronavirus. The results show just 36% of Americans are financially confident, down from 40% in 2019, while the number of outright discouraged respondents increased to 33% from 31% only a few months prior.

Worryingly, Prudential’s data shows that people of color, women, younger people, small business owners, gig workers and those employed in the retail industry are being disproportionately impacted.

PLANADVISER: Do you think there is a way to summarize these results? Were you surprised by any of them?

Kalamarides: There are so many important findings in there, but what they make me think about overall is that the American middle class is in danger. It has been for some time, but the effects of the pandemic are already starting to show. More than half of people say they expect to be stuck in their current financial position or a worse position forever—not just temporarily.  

The results of the coronavirus recession have already set many people years back—and not just young people entering the job market. There has been a disproportionate impact on people of lower and moderate incomes, Black people, Latino people, gig workers and independent business owners. People so badly desire a more stable path toward the middle class.

PA: What does the census data tell us is harming people the most right now, financially speaking?

Kalamarides: Obviously, people are feeling the job losses and the economic slowdown. But what we really see is that it’s all about liquidity. We knew going into this situation that a high proportion of people already didn’t have sufficient liquid asset savings to be able to subsist even at the poverty level for three months.

Critically, this lack of emergency savings is seen across the income spectrum. Yes, the impact has been worse on people of lesser means, but people are having liquidity problems all across the income spectrum. Unfortunately, this should not surprise us. We saw what happened with the 2018 federal government shutdown. A sizable proportion of those government workers had to seek liquidity from other sources—whether credit cards, payday advance loans or other places. That shutdown was less than six weeks in duration. It gives you some perspective on what is happening across the country right now.

PA: What concerns you most in the data?

Kalamarides: It is clearly distressing that people in minority communities, and people of lower and moderate incomes, are disproportionately out of work. They are disproportionately catching and dying of COVID-19. We have a duty and an obligation to find ways to solve the systemic challenges that are holding back far too many Americans from health, safety and prosperity.

The solutions will not be simple or easy, but getting these facts to be viable and on the mind of all Americans is the first step. I also want to say, solutions do not have to be partisan, because these issues are not partisan. They are fundamental issues to our society.

I know there is a belief out there held by some people that disadvantaged individuals should somehow be able to bootstrap their way back into security and prosperity. I must say, solutions that rely on individual agency are not going to be sufficient, nor do they recognize the systemic problems. At the same time, others believe that we should dramatically expand public assistance for disadvantaged communities. We must find middle ground and, in my view, the adviser, broker and asset management community has an important role to play. We have a responsibility to do something and an opportunity to make a big impact—to actually make a difference.

PA: What are some of the ways you can see our industry have such an impact?

Kalamarides: Our census data shows people are turning first to the government for assistance, but they are also turning to family, friends and employers next. To this point, our industry has been very good at helping people who are affluent think about protecting their wealth and build a secure retirement.

But how do we help those who aren’t affluent? These people are having liquidity problems, too, and they are needing nontraditional benefits from their employers. They need things like low-cost loans that do not come with predatory interest rates. They need paid family leave and permission to miss work to provide medical care for their families. They need help building emergency savings. Even if the employer can’t fund the savings accounts, simply the act of endorsing them and providing them matters a lot.

Advisers can advocate for these programs, both among their clients and as a matter of public policy.

PA: What do you see as the role of the employer-based retirement planning system in solving some of our nation’s biggest challenges?

Kalamarides: It can be a big one, I believe. We need to advocate for the 401(k)—for automatic enrollment and automatic deferral escalations. There is no other savings system in the U.S. that generates wealth better than a 401(k). Not housing, not anything. Those with 401(k) plans at work have 13 times more wealth than those who lack access, and that is across income levels. Today’s defined contribution (DC) plans, generally speaking, have really good default investments and they offer low costs.

For a long time, home ownership was seen as the cornerstone of the American dream. And, you know, housing was really important as we were expanding as a country and populating the country. It was really important for solders returning from Europe after the Second World War. But, in the last 20 years, the housing price volatility has been so dramatic that it has impacted peoples’ ability to accumulate wealth via home ownership.

The new American dream is about saving regularly in the stock market from your early 20s and owning a diversified global portfolio that takes advantage of time and positive volatility. A 401(k) plan provides this for most people.