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Practice Management > Diversity and Inclusion

Optimism Surges Among Black Investors: Wells Fargo

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What You Need to Know

  • Investor Optimism Index dipped from +42 in Q4 to +26 in Q1 but was +101 for Black investors.
  • The greater optimism among Black investors likely reflects the change in political leadership in Washington.
  • Investors' overall outlook for achieving their financial goals changed little.

U.S. investors’ optimism dipped in the first quarter of 2021, but their outlooks for achieving key financial goals was little changed, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index.

The index fell from +42 in the fourth quarter to +26 in the first quarter, due to less optimism about household income, the job and stock markets, and economic growth, according to the survey of more than 1,500 Americans that underpins the index.

But optimism among Black investors was much higher — +101 — reflecting greater optimism about economic growth and the stock market. Wells Fargo attributed that greater optimism to the political change in Washington, noting that the index score for Democrats was +136, compared with -84 for Republicans and -34 for independents, and that 70% of the Black investors in the survey identified as Democrats, compared with 44% of investors overall.

In addition, distribution of coronavirus vaccines in the first quarter of 2021 contributed to the outsize optimism of Black investors because the virus has had “disproportionate impact” on the Black community, explained Dave Dawkins, director of diverse client segments at Wells Fargo Advisors.

The death rate for Black Americans from COVID-19 is almost twice that of white Americans, according to the Centers for Disease Control and Prevention (CDC).

The Wells Fargo/Gallup survey included an “oversample” of Black Americans in order to yield a “robust analysis” of the views of Black investors. Among its findings: 17% of Black investors said their current income equals their expenses and 10% reported drawing on savings or borrowing to meet their expenses. Still, 70% reported they have been able to save a little or a lot.

The survey didn’t find much difference between how Black investors reported on their progress in meeting their financial-life goals compared with investors overall.

Sixty-three percent of Black investors reported paying off debt, compared with 68% of all investors. And 33% reported saving for an inheritance to leave for their children, compared with 36% of investors overall.

wells fargo investor optimism chart

Black investors reported somewhat less progress than investors overall in achieving five of six financial life goals. On saving for a child’s college education and educating their children about finances, however, Black investors scored higher — 46% and 84%, respectively versus 40% and 78% for investors generally.

“The data suggests that Black investors have come to the realization that education and financial education are going to be critical to the future success of their children financially,”  Dawkins said.

The study also found that Black male investors are significantly more risk-averse than male investors generally, which affects their ability to build and grow wealth, Dawkins said. He speculated that less access to information about how to invest, coupled with barriers to earning more income and a growing wealth gap, likely contributes to that risk aversion.

Without those resources, “probably the best thing is to be cautious,” Dawkins said. He noted that the findings in the survey about differences between Black investors and investors overall can help advisors understand the nuances and perspectives of those clients and prospects.

Advisors who aren’t aware of those different perspectives and experiences “may miss an opportunity to advise correctly, to meet the needs of their Black clients,” Dawkins said.


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