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Compliance November 10, 2023
How Advisers Can Help Close the Wealth Gap
Panelists at the CFP Board’s Diversity Summit provided insights into how financial planners and advisers can reach disadvantaged communities.
Reported by Paul Mulholland
Industry experts at the Certified Financial Planner Board’s sixth annual Diversity Summit explained some of the best practices for reaching underserved communities and closing the wealth gap, both through their everyday practice and via pro bono efforts.
When it comes to pro bono work in the adviser community, a panel of speakers emphasized the value that volunteering can bring to financial planners and to diverse clients they may not have reached before.
Louis Barajas, co-founder and CEO of International Private Wealth Advisors, underscored the sense of well-being and satisfaction pro bono work can bring to planners. He said he “feels successful” when he helps clients make money, but he “feels significant” when he volunteers for clients dealing with a crisis.
Martha Borowski, a financial empowerment program manager at the nonprofit Britepaths, noted that volunteering can serve as important experience for CFPs because “our clients educate our volunteers.” Additionally, helping people with low income, or who are experiencing a crisis, informs planners about the industry as a whole and can “make you a better financial planner.”
A different panel, about closing the wealth gap, highlighted some of the unique challenges underserved communities face and how CFPs can better serve them.
Michelle Singletary, a financial columnist for the Washington Post, addressed the misconception that the wealth gap exists “because people of color don’t know how to handle their money.” She said low-income people are often quite creative and talented at stretching their dollars, but there is a profound “fear of loss” that lower-income people have because their margin for error is so low, and they are already working so hard just to stay above water.
Such risk aversion, as well as a history of systemic discrimination, can translate into a lack of trust in financial institutions and public markets, Singletary said. She encouraged the CFPs in attendance to not just invest in the top 10% of disadvantaged communities, but the “people in the middle” also, because if they are advised and invested in properly, they can be “just as qualified.”
Singletary said that there is actually “a lot of money in our communities,” but “it’s just mismanaged right now.”