Although they are more optimistic about achieving their financial goals, a study released this week by Prudential, entitled “The African-American Financial Experience,” found that African-Americans still hold fewer financial products, are more conservative investors and still do not really have relationships with financial professionals.
The study polled 1,500 African-American financial decision makers between the ages of 25 to 70 with incomes above $25,000, and used as its benchmark 500 general population financial decision makers. While it underscored growing affluence in the community and a greater desire to want to achieve financial security, the study also showed that most African-Americans feel they have not been sufficiently engaged by financial advisors.
“Nearly eight out of 10 African-Americans feel that no finance company has made a move to address their needs,” said Sarah Thompson, VP of global market research at Prudential. “Their trust in financial professionals is quite low, but the real barriers to using a finance professional also has to do with confidence and ‘making my own decisions.’ The perception that finance professionals are too expensive and not knowing how to choose or find a finance professional are also key.”
It is clear, though, that the community needs advisors, not least because the study also showed that only two in every 10 African-Americans are on track to meet their planning and saving goals in retirement. In fact, 60% of African-Americans surveyed have less than $50,000 in their company retirement plans and only 23% have more than $100,000. However, the study showed that most African-Americans have not met a financial professional they can relate to, and they don’t see financial firms reaching out to them, Thompson said.
In order to mitigate the problem of mistrust and increase the community’s trust in the financial profession, the study highlighted the need for promoting financial literacy and education from a young age, Thompson said. Increasing financial education, she said, was a key theme among survey participants.
Prudential has set up a special site on the African-American financial experience: http://www.prudential.com/media/managed/aa/index.shtml?seg=5&name=TheAfricanAmericanFinancialExperience
The study also found that:
- African-Americans say their most important future financial needs include building wealth portfolios and retirement nest eggs, as well as transferring wealth to their heirs.
- African-American decision makers tend to be more independent learners when it comes to finances–relying on books, financial websites, financial seminars and conferences and their employers for information.
- Faith-based organizations play a big role as centers of learning for financial issues.
- African-American women are in the driver’s seat when it comes to making financial decisions in their households.
- African Americans are nearly twice as likely to have a dream of starting a small business as those in the general population (35% vs. 19%), and view starting their own small business as a path to financial freedom. However, more than half of those with an interest in starting a small business say a lack of capital has been the primary hurdle to getting started.