Annual Black Investor Survey by Ariel Investments Charles Schwab

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“Black Americans are already behind the eight ball, and it is disheartening to see that at current savings and investing rates, the wealth gap will continue to expand, endangering our futures and leaving our families exposed.” Mellody Hobson, co-CEO & President of Ariel Investments

The annual Black investor survey by Ariel Investments and Charles Schwab was recently released.

This year, the survey revealed that Black Americans continue to have less opportunity to benefit from stock market growth than white Americans at similar income levels, according to Ariel Investments. The data also showed signs of hope, including increased young investor engagement.

For more than 20 years, the Ariel-Schwab Black Investor Survey has compared attitudes and behaviors on saving and investing among Black and white Americans.

This year’s results show the deep-rooted gap in participation between the groups persists. The survey conveyed several important trends:

  • Growing engagement in the stock market by younger Black Americans, with 63% under the age of 40 now participating in the stock market, equal to their white counterparts
  • The closing of this gap among younger investors is being driven by new investors: 3 times as many Black investors as white investors (15% vs. 5%)
  • A wide investing gap exists overall – 55% of Black Americans and 71% of White Americans reporting stock-market investments

It is encouraging to view that younger African Americans are investing in greater numbers. Yet, a significant gap persist in the overall number of who invests by race and ethnicity.

More Black Americans became first-time investors in 2020 than in any other year, according to the results of a new survey by Ariel Investments and Charles Schwab. The rise has primarily been driven by younger investors: 63% of Black Americans under 40 now report participating in the stock market, equal to their white counterparts.

On the whole, however, wide gaps remain, with 55% of Black Americans and 71% of white Americans reporting stock-market investments. “This disparity, compounded over time, means that middle-class Black Americans will have less money saved for retirement and less wealth to pass onto the next generation,” the report’s authors write.

The ongoing pandemic has only exacerbated the imbalance, according to the report. In 2020:

  • More than twice as many Black 401(k) participants (12% vs. 5%) borrowed money from their retirement accounts.
  • Almost twice as many Black Americans (18% vs. 10%) dipped into an emergency fund.
  • Nine percent of Black Americans (vs. 4% of white Americans) say they asked family or friends for financial support.

“Financial literacy is a great equalizer, and a life skill that everyone needs.” Carrie Schwab-Pomerantz, President of Charles Schwab Foundation

Financial literacy and education are desperately needed in the African American community. And, it needs to start at a very early age before the vestiges of debt and negative spending behaviors becomes a difficult to break habit.

Trust Remains an Issue

Trust in the financial services industry continues to affect stock market participation among Black Americans. While similar proportions of Black and white investors believe that financial services institutions are not trustworthy, only 35 percent of African American investors feel they are treated with respect by financial institutions versus 62 percent for white investors. As a result, Black Americans are less likely to work with financial advisors.

Additionally, what works against new African Americans investors is that most wealth and financial advisors will not work with you if you don’t already have large amounts of money you either earned or inherited. This leaves the vast majority of American (Black, White, etc) out of the financial advisory equation.

There will be a conversation among leading financial services experts from Ariel Investments, Charles Schwab, and CNBC discussing the challenges driving the racial wealth opportunity gap. This group will discuss the research findings, broader trends, and how the financial services industry can challenge the status quo.

The The Racial Wealth Opportunity Gap Widened in 2020 conversation will occur on Tuesday, March 2, 2021, 3:00 – 4:00 p.m. EST.

References:

  1. https://www.aboutschwab.com/ariel-schwab-black-investor-survey-2021
  2. https://blackinvestorsurvey.swoogo.com/ariel-schwab/979446?ref=swbh?SM=URO&sf243370044=1
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