Data & Research August 7, 2015

African Americans Continue to Grow in Affluence

However, many are not taking advantage of financial and investment tools, a Prudential study finds.
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African Americans demonstrate continued optimism when it comes to finances, due to growing affluence, Prudential Financial found in its biannual “African American Financial Experience” report. However, many are not taking advantage of financial and investment tools, which may hinder long-term wealth accumulation.

Two increasingly prevalent financial priorities for African Americans are maintaining their lifestyle in retirement and not becoming a financial burden to others, Prudential says.

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“This study paints a picture of an increasingly financially savvy and affluent African American community,” says Mammen Verghis, vice president, multicultural marketing for Prudential. “We are seeing a group that is financially confident, focused on service and open to receive assistance from professionals who can help them move closer to financial security.”

More than half of African Americans (56%) say they are better off financially than they were five years ago, and 54% believe they are better off than their parents were at their age. They expect financial gains will continue to build, with 58% saying they expect the next generation to be better off financially, compared with 46% of the general population.

Just over half (52%) think they are capable of making smart financial decisions, compared to 40% of the general population. However, Prudential finds far more African Americans (59%) describe themselves as savers as opposed to investors (11%), indicating an opportunity for additional financial education.

Among African Americans who are offered an employer-sponsored retirement plan, 74% contribute to it, compared with 85% of the general population.

Asked what their top financial priority is, 51% of survey respondents said having enough money to maintain their current lifestyle in retirement. Not becoming a financial burden to loved ones is another priority, which Prudential found interesting as nearly two-thirds of survey respondents say they are a caregiver for a loved one. Among this group, individuals spend an average of 20.7 hours a week on caregiving, compared to 14.6 hours among the general population.

NEXT: Debt remains a focus

Paying down debt is also a top financial priority for 50% of African Americans, as a large majority of respondents report having at least one type of debt, the most common being credit card debt.

Nearly 40% of African American veterans said they were exposed to a good education about financial topics once they transitioned into civilian life. Although 71% of African American veterans feel very well prepared to make financial decisions and have a positive outlook on their financial situation, only 38% use the Veteran Service organization as a financial resource, with most relying on family for financial information.

Thirty-nine percent of African Americans have had contact with a financial adviser, but just over one in 10 works with a financial professional regularly, compared with 26% of the general population. The reasons why African Americans are hesitant to work with a financial professional mirror those of the general population and include the belief they have insufficient assets, a preference to manage finances themselves and perceived high fees associated with advisers.

“Each year we conduct this survey deepens our commitment to reaching diverse communities,” says Michele Green, vice president and chief diversity officer at Prudential. “We understand the important of meeting the needs of diverse consumers in relevant and authentic ways. That means helping to bridge gaps of financial knowledge and increasing access to financial professionals who can provide the advice needed to help individuals and families overcome saving and investing challenges, and to build wealth.”

Findings of this year’s survey mirror those of Prudential’s last “African American Financial Experience” survey, in 2013. This year’s survey was conducted by GfK KnowledgePanel. The full results of the survey can be downloaded here.

In Practice August 7, 2015

Educating About Advising Can Bring More Women into Industry

The Lincoln Financial Network WISE Group found, once people get a better sense of what it means to be an adviser and to work in financial services, often they are drawn to it.
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About three years ago a couple of the top women advisers at Lincoln Financial Network got together to tackle an issue that is somewhat pervasive in the financial services space.   

“Let’s face it, most advisers are men,” says Nicole Spinelli, executive director of the Lincoln Financial Network (LFN) WISE Group. She tells PLANADVISER that the name WISE is for “women inspiring, supporting and educating.”

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As Spinelli explains, WISE is an enterprise-wide initiative designed to better support the unique needs of female advisers and clients. The group helps drive strategic partnerships and educational initiatives across the LFN adviser network, with the primary goal of increasing the number of women working in the field and in leadership positions. On the client side, WISE is about creating engagement and financial management skills for everyone, but especially for women.

These aren’t just moral goals, observes Karen DeRose, a founding board member of WISE and managing partner at DeRose Financial Planning Group. When firms recruit and retain women advisers they bring in new perspectives and new energy, she says. It’s not a rule, but women advisers can often drive better engagement with female clients, leading to longer lasting relationships. “And we have all heard the statistics that women generally outlive men and are more likely than men to have to take control of family wealth near the end of life,” DeRose notes.

To get a handle on these challenges and the opportunities solving them would present to LFN, the founding members of WISE conducted a series of research projects. The effort included extensive interviews with internal advisers and other firms, to find out what they were doing to boost diversity and attract women advisers.

“We took the best practices from all these firms and gained the clearance from leadership to formally establish the WISE Group,” DeRose says. “The idea was to start implementing these best practices at LFN and more broadly. It’s an ongoing effort but I believe we have made real strides so far.”

NEXT: Awareness often means interest 

Spinelli says the WISE group members very quickly realized “the biggest issue we have right now is pipeline.”

“We saw there aren’t a lot of women advisers entering the business or being prepared to enter the business right now,” she explains. “But we also saw there are not really that many advisers in general entering the business. There is concern about a lack of focus and awareness on advising as a career path, for men and women, and this extends into worries about succession planning and a number of other areas.”

One more positive finding from the research effort was that, once people get a better sense of what it means to be an adviser and to work in financial services, often they are drawn to it. This holds for both men and women, DeRose explains, but it’s especially important for women to be encouraged to consider the field.

“It’s a great career path for women,” DeRose continues. “Unfortunately there have not really been enough examples yet to hold up and say, ‘this is what a successful women looks like in this industry.’ They’re out there, but they aren’t always getting the attention they deserve. This is what we’re talking about when we say inspiration is a big goal of WISE.”

WISE urges firms to consider mentorship programs, pairing industry newbies with long-time pros. Importantly, the teaching relationship should flow both ways—with the senior adviser instilling knowledge about business fundamentals and the junior adviser bringing new points of view, especially about technology and attracting the next generation.

The group also encourages more male-female adviser teaming.

“Our research also found women and men on a very general level think a little differently about finances,” DeRose concludes. “Men tend to gravitate towards the investment construction and analytical side of things, while women are more inclined to think about planning and objectives, things like retirement, college savings, etc. Bringing these two sides together can be a powerful combination.” 

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