Journal of Financial Planning: November 2021
It should come as no surprise to anyone that there is a racial wealth gap. The “Two American Financial Plans” report highlights that Black people only own about 1.5 percent of the United States’ wealth, even though they make up 13 percent of the population. That’s a large discrepancy.
Some people will be quick to cite excuses such as education or crime or a variety of other factors. But the gap persists even when controlling for education, employment, and other financial characteristics. There are a lot of systemic reasons for how we have arrived at this point, and it’s not an easy challenge to tackle.
Change Has to Come from Within
There is no silver bullet for the current inequality of wealth our country and the world faces, but one way to help the next generation is to increase diversity within your own organization. The ratio of Black CFP® practitioners is coincidentally about the same percent of Black wealth ownership—1.5 percent.
It can be hard for young BIPOC investors to connect with potential financial planners if their only options are between various old, white men. Years, if not decades, of unfavorable socioeconomic dynamics have fostered a mistrust of the “ruling class,” in whichever form that may be. Minority neighborhoods tend to be underfunded, and crime can be higher. A mistrust of white police officers can exist because it can seem almost authoritarian to have squads of only white officers patrolling minority neighborhoods. Some police forces are taking initiatives to have more BIPOC officers, and it has largely been a success.
Can that phenomenon also carry over to financial planning? Of course! Many organizations are already trying to increase the number of women in their ranks as well as encouraging women already there to get a CFP® certification. But diversification shouldn’t just stop there.
To help improve the lives of everyone, financial planners and financial planning firms should make a concentrated effort to better serve and start serving clients that aren’t just retired, straight, white men. An entire market of untapped potential exists within the various populaces of women, BIPOC, and LGBTQ+ people. And to more easily relate with potential clients, you should look at increasing the ranks of those very groups within your organization.
