One way to narrow the racial wealth gap may be to expand access to financial professionals that Black Americans can relate to, while helping them grow their money.
It’s the takeaway Kamila ElliottCEO of Collective Wealth Partnerswho is about to complete her one-year term as the first black chair of the CFP Board, which sets and enforces certification standards for Certified Financial Planners.
“Having cultural sensitivity, understanding the burden of being the first person in the family to be financially successful, family responsibility and the nuisances of wealth with first-generation creators are the reasons why diversity within the financial industry is important”, Elliot says Yahoo Money.
The problem is that black CFPs only represent 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 — which makes us easy prey,” Elliott said.
For example, the Ariel-Schwab survey of black investors found that black Americans have less confidence in 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 always keep money at home because they don’t trust the bank, but turn to financial ‘influencers’ who are not held to any standard or accountability and no one is rushing to see if that person is credentialed or certified,” Elliott added.
There is also a lack of access. Finding a financial planner to navigate investing is more difficult 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 is not 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 fiduciary duty to customers.
“The goal of the CFP Board of Directors 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 council Let’s make a plan helps consumers find a financial planner, including those who specifically want to help people get started.
The CFP Board offers consumer resources, many of which voluntarilythrough his Financial Planning Center. There is also CFP Prowhich features young and diverse VTCs reaching out to younger generations.
The CFP Board is also working to expand its ranks of black CFPs.
For example, this year the CFP Board announced the LeCount Davis Sr. Scholarship for African American students and professionals who want to earn 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 graduating from HBCUs — historically from black colleges and universities — when most HBCU faculty are Ivy-educated,” Davis, who first became CFP in 1978, told Yahoo Money. “Then they said, we don’t have the experience, but we don’t have the experience because they don’t want to hire us or give us an opportunity. The CFP endowed scholarship aims to bridge the experience gap.
To increase diversity in the field of financial planning, the CFP Board has scholarships that cover course and test fees for the CFP exam and in 2022 gave more than $500,000 in scholarships to professionals of color, Elliott said.
That should help more aspiring black financial planners follow in Davis’s footsteps.
“My family was financially poor, and I was the first in my family to graduate from high school,” Davis said. “When I received an athletic scholarship for college, the whole neighborhood sent me a parade because I represented their hopes and dreams. I was a product of the village and that made them proud.
Ronda is a senior personal finance reporter for Yahoo Money and an attorney with experience in law, insurance, education and government. Follow her on Twitter @writesronda
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