Even though African Americans make up about 13% of the United States population, the U.S. Bureau of Labor Statistics reports they account for only about 7.6% of financial services practitioners.
In response to this significant representation gap, several business and community leaders are leading efforts to change the face of the advisory industry into one more representative of the United States as a whole.
The American College of Financial Services is starting by launching a scholarship program as part of its “mission to double the number of African Americans working in the financial services industry within the next decade.” Anyone who is Black or African American and is in college, recently graduated, or interested in changing careers is welcomed to apply.
According to the organization, the program would cover 100% of the cost of earning a professional designation such as certified financial planner (CFP) or earning a master degree in financial services or financial management.
American College Assistant Professor and CEO of Ascensus Wealth Management Jocelyn Wright says the idea for the scholarship grew out of a story in a local Philadelphia paper about the retirement income gap among African Americans. She says the story quoted an astronaut who said the percentage of black people in America’s space program outpaces their representation in the financial services industry.
That note also struck American College President Robert Johnson, so the school moved to start the scholarship fund, initially committing $200,000. Johnson says he plans to expand the program “into the millions with the help of donors, corporate partners, and supporters.”
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Professionals cite various reasons as to why African Americans have been underrepresented in the industry. One factor is psychological.
“If you were to Google ‘financial adviser’ and look at the pictures that come up, you’d largely see pictures of older, white men,” Wright says. “And that is the face of the profession. That might be a hinder initially, because if you see someone that doesn’t look like you, you may say 'well, that's not for me.' So we need to expand the face of what a financial adviser looks like. And that’s not just more African Americans, that’s more women and more people of underserved backgrounds.”
Delvin Joyce, managing director of the South Florida Financial Group at Prudential Advisors, points to research that shows African Americans are often “more entrepreneurial than the general population, and many see themselves as wanting to start their own business.” This fits well with the entrepreneurial spirit generally associated with the advising industry—both among large and small firms alike.
“Importantly, there’s been a lot of research showing that more diversity helps the bottom line,” Write says. “You don’t want people who all come from the same background. You want diversity of thought and expression so you can expand where your business is going.”
Clearly, better diversity could help propel advisory businesses deeper into communities where people may have otherwise not thought to engage with a financial professional. It will also help if those people already in the industry, whatever their background, help break down misconceptions and raise better awareness of what advising is really all about .
“I hear it all too often that advising is only for people who are really wealthy,” Wright says. “I’ve had friends and family say ‘I will come to you when I make my first million.’ That’s not how it works. You don’t go to the doctor once you’ve cured yourself.”
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According to a study by Prudential, titled “The African American Financial Experience,” many African Americans report they have been reached out to by financial professionals, but only 14% actively work with one.
Joyce says his firm’s studies show that many African Americans prefer to receive financial information through faith-based organizations, social media, and community outreach programs instead of advisers. Using that intel, the firm conducts career information seminars and dinners with different diversity organizations. They also offer debt-management programs through churches and send advisers to teach financial literacy to members of different community organizations.
“While we’re there, we always give a plug for the career and the talk about the opportunity to become a financial adviser,” Joyce says.
Out of those who don’t engage with a financial adviser, Prudential found most cited not having enough assets as the primary reason. But despite well-reported income gaps between black people and their white counter parts, research suggests African Americans still hold a significant amount of wealth, and many are highly active about managing their finances. The U.S. Bureau of Labor Statistics indicates that weekly earnings for African Americans have increased by 33% in the last 14 years. However, a recent study by Financial Finesse found that the biggest financial concern for African Americans was getting out of debt—rather than retirement planning.
Another important fact for firms to consider is that African Americans will almost certainly outpace white people in terms of population growth in the U.S. over the next 30 years or longer—barring significant changes to population growth trends.
“The demographics of this country are changing and if you miss that opportunity, you are doing yourself and your business a disservice,” explains Wright. “It will only help the business to expand and have more people from diverse communities working for them.”
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The Prudential study also found that 25% of advisers expect to retire or leave the industry within the next 10 years. Nine million African Americans are also expected to retire in the next 20 years.
Taken together, these figures provide African Americans with not only an opportunity to pursue financial services roles, but also to provide much-needed financial support to families in a growing section of the population, experts agree.
According to a recent Prudential study, African Americans have about as much access to employer-sponsored retirement plans as the general population, but many are contributing significantly less than their white counterparts. It also found the second most important financial obligation for African Americans was “having enough money to maintain my lifestyle throughout retirement.” This was reflected in a recent study by asset management firm Vanguard, which also found that black people are more likely to take withdrawals.
Wright says her own advancement in the industry had a lot to do with the people around her. Now a CEO, she tells PLANADVISER she became interested in financial planning after suffering the loss of her grandmother while a sophomore in college.
“My grandmother had a small life insurance policy so I knew my dad and siblings had to come up with the difference,” she recalls. “And that always struck me as strange. Although I wasn’t involved in those conversations because I wasn’t in a position to contribute financially, I knew that if this was happening to my family, it was probably happening to others and I wanted to know how to prevent that.”
She went on to find a mentor when she started working at her first firm, which was led by an African American women. Now, she says she is very happy to see an array of colleges and professional organizations encouraging African American students to become the mentors of future generations in the financial services space.
“The more examples of successful African Americans in the financial services industry, the more it helps breakdown that stereotype that the typical financial adviser is an old white guy,” Joyce says.