Helping Black Americans bridge the racial wealth gap

Alexis Harris’s clients – a couple in their mid-30s – seemed to be on a good path.

They wanted to save for their retirement, save for their newborn daughter’s education and build a legacy that would impact their daughter as well as the generations after her. This couple was disciplined about saving and investing. But they had not considered their parents’ lack of financial planning.

Harris asked her clients whether they planned to support their parents in the future. After some discussion, Harris and the couple decided to include the parents in future conversations.

She met with each set of parents soon afterward and helped them to understand how a financial plan would help keep them from becoming a financial burden on their children. Harris and the parents discussed retirement income distribution strategies, the importance of long-term care insurance and whether the parents had any debt that would have an impact on their children.

Harris then connected the parents with an estate planning attorney to make sure they had the proper wills and health care directives in place.

“All of this was jointly funded by the parents and my clients, who felt an immediate sense of reassurance and clarity knowing their parents’ finances are in a good spot,” Harris said.

She then implemented similar strategies for the couple and placed a life insurance policy on their newborn daughter.

“This process is how generational wealth is created – by not only focusing on effective strategies, but by implementing the proper risk management strategies across all generations to ensure greater stability and predictability into the future,” said Harris, who is a Northwestern Mutual advisor in Fort Worth, Texas.

Helping close the racial wealth gap

Harris told InsuranceNewsNet she believes helping clients create generational wealth is crucial to helping close the racial wealth gap, and she is passionate about educating Black clients on ways they can attain financial security for themselves and the next generation.

“I have many clients who have goals of leaving a legacy behind to their loved ones, mainly their children, and have the desire to build generational wealth,” she said. “In many situations, life insurance can be a great tool to be able to accomplish that goal for clients. I think that African Americans in particular need to be educated about their different options for building generational wealth. That’s what we’re able to provide within my practice.”

White Americans hold 84% of total U.S. wealth but make up 60% of the population — while Black Americans hold 4% of the wealth and make up 13% of the population, according to a 2022 study by the Federal Reserve Bank of Minneapolis.

Harris said most of her Black clients already owned some life insurance when they started working with her. But they viewed life insurance as a way to pay for final expenses and not necessarily as a way to pass wealth to the next generation.

“When I'm consulting with African American clients for the first time, they will tell me, ‘OK, we've got this in place for burial purposes.’ But one of the questions I ask is, ‘How did you determine the proper amount of life insurance to put in place?’ What I often learn is that clients have never been educated about the different types of life insurance or about what things life insurance actually can cover. So we walk our clients through a capital needs analysis and help them understand what life insurance can solve for at the end of life.”

Harris said she helps clients understand that life insurance not only can pass wealth tax-free to their beneficiaries, but “it can help them with things like paying off a mortgage, being able to leave real estate to your heirs without a mortgage balance on it so that can help create additional wealth if they decide to sell or rent out that property.”

Opportunities to reach Black consumers

As more Black Americans enter the life insurance and financial services industry, there are more opportunities for Black consumers to see someone who looks like them and who understands their needs, Harris said. This also can help more Black consumers obtain life insurance.

“It's about educating our communities, having the representation and being able to communicate in a way that can be understood and as well as trusted,” she said.

For advisors who want to work with Black consumers, Harris suggested “building trust with the client, and then taking an empathetic approach.”

“This client might not know what the different types of life insurance are and they might need you to take a more methodical approach about explaining them and helping them visualize what things could be taken care of with this particular tool. Walking them through a true capital needs analysis and helping them understand the different types of coverage is a good place to start.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.

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