Financial advisors are often one of the first calls Americans make when they face the unthinkable, such as the passing of a loved one or sudden job loss. Those professionals are also there for some of life’s big milestones like buying a home, having a baby or entering retirement. Because this client-financial advisor relationship is so much more than a series of professional transactions, the right fit has to be there, as well — and for many in the Black community, that fit can be hard to see across the table.
Studies have shown that people are more likely to trust people they perceive as similar to them. By that standard, the financial industry falls short when it comes to Black financial advisors. Just 1.9% of financial advisors in the industry today are Black, according to the Certified Financial Planner Board of Standards. That means that Black Americans are having some of their most important conversations with professionals who don’t share a similar background.
It’s up to all of us to change that. Here are three important reasons why.
Financial literacy
Working with a financial advisor can help clients better understand important topics like budgeting, investing and saving, ultimately setting them up for long-term success. Increasing diverse representation in the industry has the potential to dramatically improve financial literacy in the Black community because learning from someone who looks and thinks like you can help a message resonate.
Generational wealth
We know clients want to be able to pass down money and assets to their children. However, for many Black Americans, this simply isn’t an option. According to a 2022 study by the Urban Institute, those in Black communities are more likely to begin their adulthood with lower credit scores and higher amounts of debt. This automatically sets people back and makes it harder for them to achieve wealth over time.
READ MORE: 7 tips to help Black clients find multigenerational success
Greater inclusivity in the financial industry means gaining more knowledge of the unique challenges facing Black Americans. Black financial advisors can help eliminate barriers, like debt, so clients can achieve greater prosperity and share it with future generations.
Increased retirement readiness
Those with strong retirement plans in place are four times more likely to achieve their financial goals than those who did little or no planning for retirement, according to a Thrivent survey. However, only 41% of Black families have retirement account savings, according to 2016 data from the Economic Policy Institute.
Financial advisors not only play a critical role in guiding clients on cash flow and budgeting practices, but they can also help Black Americans create personalized retirement strategies that minimize the risk of facing financial hardships during a period of life that’s meant to be enjoyed.
Putting words into actions
So, how do we achieve this goal?
In recruiting financial advisors to my firm, Thrivent, I’ve found that targeted outreach programs and mentorship initiatives are very effective in bringing more Black Americans into the profession. My firm also provides funding to help diverse talent attend industry conferences to foster development.
READ MORE: How Jackie Robinson’s financial legacy lives on in the industry today
If all firms start and continue to actively recruit and develop diverse talent, I believe we can live in a world where people from every community have access to financial advisors with similar cultural backgrounds to the clients they serve. The spotlight on Black financial advisors may shine brighter during Black History Month, but it’s our collective responsibility to make sure that light doesn’t dim for the other 11 months of the year.
Having more Black financial advisors can be the catalyst to closing the wealth gap in America and helping even more people achieve greater clarity when it comes to their finances. That’s a goal all financial advisors can aspire to, together.