Signs of younger investor engagement offer
hope
The results of the 2020 Ariel-Schwab Black Investor Survey
reveal that Black Americans are not benefitting from stock market
growth at the same rate as white Americans at similar income
levels. The deep-rooted gap in participation between the groups
persists, with 55 percent of Black Americans and 71 percent 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 than their white peers.
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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. African American participation in the
stock market stands at its lowest level in the history of the
survey. According to Mellody Hobson, co-CEO and President of Ariel
Investments, and the driving force behind this study, “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.”
In a year like no other, however, there is also evidence of
growing engagement in the stock market by younger Black Americans,
with 63 percent 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: three
times as many Black investors as white investors (15% vs. 5%)
report having invested in the market for the first time in 2020.
Twenty-nine percent of Black investors under the age of 40 were new
to investing in 2020 compared to 16 percent of whites.
Rick Wurster, Executive Vice President, Schwab Asset Management
Solutions, says, “These findings are encouraging for younger Black
investors, but there is much work to be done to ensure that Black
Americans have access to the resources they need to stay engaged
and successfully investing for the long-term.”
His colleague Carrie Schwab-Pomerantz, President of Charles
Schwab Foundation, agrees, “Many Americans are struggling to make
ends meet and don’t have access to educational resources and tools
that can help them avoid financial pitfalls and get on the right
track. Financial literacy is a great equalizer, and a life skill
that everyone needs. We have a responsibility to help people
develop the knowledge and skills to become financially confident
and remain lifelong savers and investors.”
401(k) Plans and Beyond
Over the last several decades, 401(k) plans have become an
important gateway to investing for many Black Americans, with 63
percent of Black investors having first invested in the stock
market through a retirement plan. Ownership rates of 401(k) plans
are now similar between Black and white Americans (53% vs. 55%).
But savings rates show meaningful differences. Specifically, white
401(k) plan participants invest 26 percent more per month toward
their retirement accounts than Black 401(k) plan participants ($291
vs. $231).
Beyond investing, the survey finds that Black Americans are less
likely than white Americans to own almost every kind of financial
vehicle, with the exception of whole life insurance, which is
favored in the Black community. They are also less likely than
white Americans to have written wills, financial plans, or
retirement plans.
For Black Americans, disparities grow every month; while they
save $393 overall per month, whites are saving 76 percent more, at
$693 per month. Even Black Americans who earn more than $100,000 a
year consistently save or invest considerably less than their white
counterparts at the same income level.
“These differences are not new. Black Americans are
disadvantaged from the outset when it comes to building wealth,”
says Hobson. She notes that while 51 percent of white Americans say
they have inherited wealth, just 23 percent of Black Americans
have.
Schwab-Pomerantz points out that more white Americans (44%) than
Black Americans (33%) are focused on preparing for retirement as
their most important financial goal. “For so many Americans, the
401(k) is the first step to becoming an investor, and while it’s
encouraging to see greater parity among those who have access to
this opportunity through their workplace, it’s incumbent on
employers and all of us in our industry to help 401(k) owners save
more throughout their earning years,” she says.
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 (23% vs. 20%), only 35
percent of African American investors feel they are treated with
respect by financial institutions versus 62 percent for white
investors. Additionally, Black Americans are considerably more
likely to cite the importance of racial diversity within the
employee ranks at investment firms (63% vs 27%).
Black Americans are less likely to work with financial advisors
(21% vs. 45% of whites), but Rick Wurster points out that the
majority of Black investors who do work with a financial advisor
say they feel like they are treated with respect by financial
institutions, and he believes that encouraging these relationships
will lead to positive change. “I believe this is a clear call to
action for our industry that these partnerships should be
nourished, because they can be truly impactful,” he says.
Belts Tightened but Optimism Prevails
The pandemic, not surprisingly, affected Black and white
Americans in different ways financially. While both groups report a
sharply increased focus on saving for emergencies compared to prior
years, the pandemic’s impact on the economy caused Black Americans
to take action in greater numbers than white Americans.
Black Americans were more likely to cut spending on both extras
(50% vs. 41%) and basics (19% vs. 13%). Student loan delay or
deferral was reported as being three times more common among Black
Americans (16%) than whites (5%).
Despite this, a sizable minority of Black Americans – and
significantly more than white Americans – were forced to tap their
savings to make ends meet. More than twice as many Black 401(k)
plan participants (12% vs. 5%) borrowed money from their retirement
accounts. Almost twice as many Black Americans (18% vs. 10%) dipped
into an emergency fund. And nine percent of Black Americans (vs. 4%
of white Americans) say they asked their family or friends for
financial support in 2020, while 18 percent of Black Americans and
13 percent of white Americans acknowledged giving financial support
to family and friends last year.
Hobson emphasizes, “The pandemic has further exposed fault lines
between the fortunes of middle-class Black and white Americans.”
She notes although real problems persist, Black Americans remain
eternally optimistic: when asked to forecast their personal
financial situation in 2021 compared to 2020, 60 percent of Black
Americans say they feel their situations will improve, compared to
only 40 percent of white Americans who felt the same way.
This optimism, coupled perhaps with the unique circumstances of
the 2020 market, created an opportunity for historically
underinvested Black Americans to help one another learn more about
investing. “Not only are Black Americans beginning to walk the
walk, we are also beginning to talk the talk,” adds Hobson, noting
that Black Americans are now much more likely to discuss the stock
market with their families than in years past.
Black Americans
White Americans
Discussed Stock Market Growing
Up
10%
23%
Discuss Stock Market Now
37%
36%
These dinner conversations appear to be paying off: more than
twice as many Black investors under the age of 40 (18% vs. 7% of
older Black investors) say they discussed the stock market growing
up. Overall, about half of all Black investors (49%) say they are
the first in their families to ever invest, compared to 39 percent
of white investors.
Committed to Diversity and Inclusion
As the first minority-owned investment firm established in the
United States, Ariel Investments is a leader in the financial
services industry as it relates to diversity, equity and inclusion
issues. Today, the firm is 89 percent owned by women and
minorities, with women comprising over half of the
organization—including 14 holding executive or senior level
positions. Ariel’s efforts extend into the boardrooms of the
companies it owns, cementing their legacy as change agents in the
asset management industry, and by having helped place over 50
diverse individuals on portfolio company boards. Eighteen years
ago, Ariel partnered with Russell Reynolds Associates to create the
Black Corporate Directors Conference, bringing together leading
Fortune 500 Black and Latinx directors to advance the civil rights
agenda in the boardroom and across all business sectors.
Since its founding, Ariel has encouraged a firmwide policy of
community involvement and civic responsibility. It has created
unique educational opportunities for economically disadvantaged
youth through the Ariel Education Initiative, which provides
financial educational opportunities and resources for low-income,
inner-city youth, which may have been otherwise unavailable.
Additionally, the Ariel Community Academy (ACA) was created as a
small Chicago Public School based on a
student-family-school-community partnership. Lastly, in 2017,
Founder John W. Rogers, Jr., partnered with the University of
Chicago on a financial internship program that connects interns
from underrepresented backgrounds with endowment, foundation and
non-profit investment offices across the country.
Charles Schwab has been committed to creating greater access in
financial services since day one. Schwab is a leader in delivering
financial education through its partnerships with Boys and Girls
Clubs of America, DonorsChoose.org, and SIFMA Foundation, as well
as its free personal finance resources available at
SchwabMoneyWise.com. In addition to its work with Ariel
Investments, Schwab is advancing its diversity and inclusion
efforts by:
- Mobilizing a special corps of employee volunteers who will be
trained to deliver financial education programs, with a special
focus on underrepresented teens from low-income backgrounds
- Funding a $3.5 million endowed scholarship program – funded
through Charles Schwab Foundation – to provide financial assistance
and career opportunities to college students from underrepresented
communities
- Providing mentorship opportunities to support career growth
opportunities for employees of color
About the Survey
The online survey was conducted in December 2020 by Helical
Research among 2,104 Americans age 18 and older with $50,000 or
more household income in 2019. The margin of error for the total
survey sample is two percentage points. Detailed survey results can
be found here. Historical survey data can be found here.
About Ariel Investments
Ariel Investments, LLC is a global value-based asset management
firm founded in 1983. The firm is headquartered in Chicago, with
offices in New York City, Washington, D.C., and Sydney. As of
January 31, 2021, Ariel’s firm-wide assets under management totaled
approximately $15 billion. The firm serves individual and
institutional investors through five no-load mutual funds and 11
separate account strategies. For more information, please visit
Ariel’s website at arielinvestments.com.
About Charles Schwab
At Charles Schwab we believe in the power of investing to help
individuals create a better tomorrow. We have a history of
challenging the status quo in our industry, innovating in ways that
benefit investors and the advisors and employers who serve them,
and championing our clients’ goals with passion and integrity.
More information is available at www.aboutschwab.com. Follow us
on Twitter, Facebook, YouTube and LinkedIn.
About The Charles Schwab Corporation
The Charles Schwab Corporation (NYSE: SCHW) is a leading
provider of financial services, with 30.5 million active brokerage
accounts, 2.1 million corporate retirement plan participants, 1.5
million banking accounts, and $6.8 trillion in client assets as of
January 31, 2021. Through its operating subsidiaries, the company
provides a full range of wealth management, securities brokerage,
banking, asset management, custody, and financial advisory services
to individual investors and independent investment advisors. Its
broker-dealer subsidiaries, Charles Schwab & Co., Inc., TD
Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC,
https://www.sipc.org), and their affiliates offer a complete range
of investment services and products including an extensive
selection of mutual funds; financial planning and investment
advice; retirement plan and equity compensation plan services;
referrals to independent, fee-based investment advisors; and
custodial, operational and trading support for independent,
fee-based investment advisors through Schwab Advisor Services. Its
primary banking subsidiary, Charles Schwab Bank, SSB (member FDIC
and an Equal Housing Lender), provides banking and lending services
and products. More information is available at
https://www.aboutschwab.com.
TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. are
separate but affiliated companies and subsidiaries of TD Ameritrade
Holding Corporation. TD Ameritrade Holding Corporation is a wholly
owned subsidiary of The Charles Schwab Corporation. TD Ameritrade
is a trademark jointly owned by TD Ameritrade IP Company, Inc. and
The Toronto-Dominion Bank.
About Charles Schwab Foundation
Charles Schwab Foundation is an independent nonprofit public
benefit corporation, funded by The Charles Schwab Corporation and
classified by the IRS as a charity under section 501(c)(3) of the
Internal Revenue Code. The Foundation is neither a part of Charles
Schwab & Co., Inc. (member SIPC) nor its parent company, The
Charles Schwab Corporation. Its mission is to educate, volunteer
and advocate on behalf of those in need so that everyone has the
opportunity to achieve financial well-being. More information is
available at https://www.aboutschwab.com/citizenship.
0221-1NK4
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Christina Sciarrino Ariel Investments 321-277-2854
csciarrino@arielinvestments.com Stephanie Corns Charles Schwab
415-629-0700 stephanie.corns@schwab.com
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