The racial wealth gap is not new, and certainly the AFC® community did not need to be told that it exists. But this is the year that everyone is talking about it. And while long overdue recognition is absolutely a positive step forward, the next question must be “What do we do about it?” More specifically, what can an AFC do in their practice to actually reduce the racial wealth gap? I have four ideas in mind:
- Address your knowledge gaps about programs and strategies that are relevant to households that are not in the upper echelon of wealth.
How much ink has been spilled this year discussing Roth conversions, or on how to save on closing costs when refinancing a mortgage? Imagine if some of that brain power was devoted to learning the ins-and-outs of government programs to support first-time home buyers. For every hour you spend diving into the details of 529 programs, spend an equal amount of time uncovering the intricacies of the FAFSA. Devote equal time to learning about how to maximize the Earned Income Tax Credit and tax deduction strategies that favor households in higher tax brackets.
- Challenge “conventional wisdom” financial advice.
The average life expectancy of a Black male today is 71.8 years. Does it make sense to advise this person to base their retirement plan on not taking Social Security until age 70? Is waiting to buy a home until you have amassed a 20 percent down payment useful advice for someone who cannot depend on a contribution from their parents’ wealth? Health Savings Accounts are great…but perhaps not so much for families of color who suffer disproportionately from poor health, often due to the environment, and so experience higher medical expenses. Consider if “one size fits all” advice truly fits “all.”
- Take a look at how you deliver your advice and your fee structure.
Are you reaching the people who need your advice the most? This is probably the trickiest area to navigate and a long-standing dilemma for many financial professionals, not just AFCs. We must continuously challenge ourselves to do better, experimenting with business models that can make high quality financial advice accessible to the broadest possible audience.
- Advocate for policies that build wealth across the income spectrum.
Systemic racism demands a systemic response. As AFCs we can help not just the individual in front of us to build wealth but assist entire communities to do so. This does not need to be a partisan effort. A plethora of worthy policy proposals exist from across the political spectrum that address the financial issues that matter most to minority communities. There are actionable proposals on the table right now to incentivize both short term and retirement savings, broaden the reach of financial literacy efforts, make housing more affordable and protect employees’ income. Support good ideas with your time, your voice, and your expertise.
How you are addressing the racial wealth gap in your practice?
Guest Contributor: Lisa Whitley