Yahoo Finance Tackling the racial wealth gap: 'Diversity within the financial industry matters'
One way to shrink the racial wealth gap may be by expanding access to financial professionals who Black Americans can identify with, while helping them to grow their money.
That’s the takeaway from Kamila Elliott, CEO of Collective Wealth Partners, who is about to complete her one-year term as the first Black board chair of the CFP Board, which sets and enforces standards for the certified financial planner certification.
“Having cultural sensitivity, understanding the burden of being the first person in the family to be financially successful, family responsibility, and the nuances of wealth with first-generation creators are why diversity within the financial industry matters,” Elliott told Yahoo Money.
The problem is that Black CFPs represent only 1.8% of all CFPs, even though nearly two-thirds of Black Americans would like a financial advisor of the same race, according to the Ariel-Schwab Black investor survey.
“There’s an inherent lack of trust with people of color when it comes to the financial industry due to a lack of financial literacy — making us easy prey,” Elliott said.
For instance, the Ariel-Schwab Black investor survey found that Black Americans are less trusting of the stock market and financial institutions than white Americans. And Black investors are more likely to trust social media to make investment decisions, especially those under 40.
“People still keep money in the house because they don't trust the bank, but turn to financial ‘influencers’ that aren’t held to any standards or accountability and no one is kicking the tires to see if this person is accredited or certified,” Elliott added.
There’s also a lack of access. Finding a financial planner to navigate investing is harder if an investor has smaller sums to invest. Now, with robo-advisors like Fidelity Go, it’s easier to start investing at a much lower threshold.
However, a robo advisor isn’t the same as a financial advisor or financial planner. A good financial planner develops a holistic plan that incorporates budgeting, estate and retirement planning, financial planning, and has a fiduciary duty to clients.
“The goal of the CFP Board is to serve the public by providing competent ethical planning and ensuring that CFP professionals are held to the highest standards,” Elliott said. “The CFP Board’s Let’s Make a Plan website helps consumers find a financial planner, including those that specifically want to help people starting off.”
The CFP Board offers resources to consumers, many pro bono, through its Center for Financial Planning. There’s also CFP Pro, which features young, diverse CFPs reaching younger generations.
The CFP Board is also working to expand its ranks of Black CFPs.
For instance this year, the CFP Board announced the LeCount Davis Sr. endowed scholarship for African American students and professionals who want to get CFP certification and practice financial planning named after the first Black CFP
“First, they said we didn’t have the education and wouldn’t consider graduates from HBCUs — historically Black colleges and universities — when most of the professors at HBCUs are Ivy educated,” Davis, who first became a CFP in 1978, told Yahoo Money. “Then they said, we didn’t have the experience, but we don’t have experience because they won’t hire us or give us an opportunity. The CFP endowed scholarship is to bridge the experience gap.”
To increase diversity in the field of financial planning, the CFP Board has scholarships that cover the course and test fees for the CFP exam and in 2022 gave over $500,000 in scholarships to professionals of color, Elliott said.
That should help more aspiring Black financial planners follow in Davis’ footsteps.
“My family was poor financially and I was the first in my family to graduate from high school,” Davis said. “When I received an athletic scholarship for college, the entire neighborhood gave me a parade send off because I represented their hopes and dreams. I was a product of the village and it made them proud.”
Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda
Read the latest personal finance trends and news from Yahoo Money.
Follow Yahoo Finance on Twitter, Instagram, YouTube, Facebook, Flipboard, and LinkedIn.
