Despite an increase in wealth, a proven track record of financial progress and greater overall financial confidence, the African-American community still has little contact with the financial advisory community, says a recently released study by Prudential Financial titled “The African-American Financial Experience.”
According to the study, the second of its kind, approximately four in 10 African-American households surveyed have annual incomes of at least $75,000, and nearly a quarter earn $100,000 or more. And yet, says Michael Davis, senior vice president of stable value at Prudential Retirement, most of these folks haven’t yet been privy to the kind of financial planning support that they require to achieve their financial goals.
“This should serve as a wake-up call for financial advisors to build up the connectivity that’s missing,” Davis says, not least because half of the African-Americans surveyed say they believe working with an advisor would help them make better financial decisions and only 19% even have a financial advisor.
Of course, there is a “barbell of experiences” within the broader community, Davis says, which means that some members are doing far better than others, and there are numerous headwinds and obstacles to financial progress within the broader African-American community, namely the ability to pay down mounting debt.
However, there’s no doubt that “there’s a distinct need for advisors to serve African-Americans, and the study shows that African-Americans are less likely to be contacted by an advisor than any other market segment,” he says.
Many advisors may not be doing the needful because they feel they’re not from the community, but that’s not a requirement at all, Davis says. It’s important for an advisor to have an understanding of different communities and to invest resources to learn about their unique cultural peculiarities. For instance, African-Americans are more likely to live in multigenerational homes headed by women, and many provide financial support to other family members, he says. But an advisor needn’t be a part of a particular community to serve it well.
Prudential’s study is based on a March 2013 poll of 1,153 African-Americans and 471 general-population Americans on a broad range of financial topics. Respondents were 25 to 70 years old, with a household income of $25,000 or more and with some involvement in household financial decisions. Among those meeting the survey criterion of $25,000 or more in household income, the median household income was $61,000.