I am an African American financial advisor and financial planner so I can be biased. But I’ve found that no matter what race my client is, by finding shared experiences I am able to explain complex financial concepts, as well as allay fears about their “financial life”.

African-American financial planners play important role in racial pension crisis

National Institute on Retirement Security (NIRS) publication “Race and retirement insecurity in the United States” in 2013 highlighting racial disparities in retirement preparation. Around this time, I wrote a blog post titled The Divided African-American Retreat We Fall. I believe I have a unique view of this situation. None of my blood relatives had any specific training in retirement planning. They were not blessed with a transfer of wealth from their parents. In fact, they were happy to have survived Jim Crow!

Fortunately, my parents were both lucky enough to have pensions from the companies they work for, as well as social security. Some of their family members were not so blessed and never received a Social Security check for the years they worked.

Many blacks are aware of the higher death rates for blacks and figure, “Why should I save? If I do it that long, I’ll get Social Security! It’s even more cemented in their minds as we see so many high-profile cases of violence against black men.

All of our futures are uncertain. My father arrived at 83; his 90-year-old brother. The majority of their families died in their 50s or less! For this reason, it is wise to believe that there is a chance that you will live to see a day when you will not work. Depending on your level of wealth, you can call it financial freedom or retirement!

Most African American financial advisers I speak to have similar life stories to mine. I think it’s an asset for advising African-American clients and prospects.

African American Financial Planners Offer Shared Experiences

Many black people have had a bad experience with the financial services industry or are aware of the bad experiences of others. Many were unable to get loans or found themselves paying higher interest rates depending on their color. While they may have overcome these issues, they are also often the target of some type of financial scam.

Predatory lending is a term often associated with communities of color. A study cited in the report noted that less than one in four African Americans who were in the top quartile of black wealth holders in 1984, stayed there in 2004.

The report also cites a study that found that black business owners received bank loans less frequently, were smaller in size, and at higher interest rates than white-owned businesses. ¹

It is therefore not surprising that, according to research by Prudential

PBIP
2 and ING³, blacks tend to be more conservative investors than whites. Even rich African Americans are much more conservative with their savings than whites with similar finances.

A study conducted by Credit Suisse, in conjunction with the Institute on Assets and Social Policy at Brandeis University, found that the richest 5% of African Americans, those with a net worth of $ 357,000 or more, devote a larger share of their holdings to low-risk, low-return investment vehicles, such as certificates of deposit, savings bonds and insurance policies, rather than stocks, bonds and mutual funds, investing more of their money in cash and savings bonds.⁴

African American financial planning professionals deliver reliability

It’s hard to trust something that you don’t understand. A survey noted that a major obstacle to maximizing DC participation is the lack of education on how these plans work. My experience with an African American woman who works for a nationally recognized hospital illustrates this point. For about a decade, she had invested her 401 (k) money in a money market. She trusted my advice for investing in a balanced portfolio of stocks and bonds. On another occasion, I found out that she didn’t even know what a stock or bond was.

How do you get people to trust and invest their hard earned money if they don’t understand the building blocks of 401 (k) investing?

Many young African Americans tend to look to sports and entertainment as a way to get rich. Unfortunately, high income does not always translate into wealth. Many of those who had good incomes lost them because they had no training in how to assess the risks of their spending or investments.

It infuriates me every time I hear of another story of an athlete who was abused by a financial professional. Many people were referred by someone who may have well-intentioned, but who was unable to properly verify their expertise, and if they were worth of trust.

I believe an African American counselor can understand the pressures many of these young people are under as they try to help their families out of the “hood.” Many spend their entire lives spending too much money at the expense of their future.

What about their friends who haven’t had the chance to be physically gifted. If their high school, church, or university didn’t teach them, where will they learn? Who will teach them?

I am proud to say that I am a member of the Association of African American Financial Advisors. Currently few in number, I hope to see the number of African American financial advisers grow. In 2000, while I was pursuing my MBA at MIT, I was asked why there weren’t more black students pursuing careers in finance. My response was that there was simply a lack of exposure!

African American financial planners must have the right education

As far as advice to the masses is concerned, the advice and education must be impartial and independent of the products purchased. Not all African American financial planning professionals are independent. Many can also sell one thing, life insurance. While this is an important part of a well-balanced financial plan, it’s not all.

Some finance professionals such as a CERTIFIED FINANCIAL PLANNER ™ professional or an investment advisor representative are obligated to work in the sole interest of their client.

A CFP® has successfully completed comprehensive courses in the areas of insurance (risk management), retirement planning, tax planning, investment planning and estate planning. Their skills were validated by passing a grueling two-day comprehensive exam.

If you want to learn more or work on an education program to reverse the results, all you have to do is search for “African American Financial Advisors.”