Charles Schwab Foundation president Carrie Schwab-Pomerantz and executive vice president of Schwab’s Asset Management Solutions Rick Wurster discuss the results of the new Ariel-Schwab Black Investor Survey, co-sponsored with Ariel Investments, which compares attitudes and behaviors on saving and investing among Black and white Americans.
1) First things first: What is the 1 thing that you want people to know about the disparities in investing among Black and white Americans?
Rick: The 2020 survey revealed the lowest stock market participation among Black Americans in the survey’s history, with just 55% owning stock investments.
- Almost half of Black Americans are missing out on the opportunity to build wealth, and over time, Black Americans will have less money saved for retirement and less wealth to pass on.
2) The background: How have these disparities and similarities evolved from years past?
Carrie: The disparities are not new, but there are signs the investing gap is closing.
- Black and white Americans under 40 are investing at the same rate (63%), and we see parity in ownership of 401(k) plans (53% vs. 55%).
- For many Americans, the 401(k) is the first step to investing and building wealth, so it’s encouraging to see Black Americans engaging with this important retirement savings tool.
3) The reason: What challenges do Black Americans face regarding investing?
Carrie: Older Black Americans are not as engaged in investing as the younger generation, which can make retirement less comfortable.
- You need to plan for retirement during your working years. Start by contributing as much as you can to a 401(k), and take advantage of any company match.
4) Key numbers: Which statistic from the survey was most surprising to you? Why?
Rick: There were three times as many new Black investors as white investors in 2020 (15% vs. 5%).
We have a responsibility to help new investors stay engaged with their money, and provide education and guidance to reach their financial goals. Learn more about Investing Principles.
5) Why it’s important: Why is financial literacy so essential?
Carrie: Studies show that when people are financially literate, they’re more likely to:
- Go to college.
- Have higher credit scores.
- Perform better in their jobs.
- Have a greater ability to manage financial shocks.
Lack of financial literacy contributes to bigger social issues, including poverty, a growing wealth gap, and racial inequity.
6) The takeaway: The survey found that Black Americans are less likely to work with financial advisors, but those who do report positive experiences. Why and how should financial institutions encourage these relationships?
Rick: We’re building a diverse population of advisors who can help clients achieve their financial dreams.
The more our clients engage with these advisors, the more likely they are to save and prepare for their futures.
- Working in communities, through trusted employers and faith-based groups, our industry can reach more people who need and want advice.