Women of color are creating a positive financial outcome
Women of color in the U.S. are committed to writing their own financial narratives to create better outcomes than those who came before them, according to new research from Edelman Financial Engines. The study also offered some helpful hints on helping these women achieve their goals.
The report, titled Women of Color & Wealth: Striving to Create a New Financial Future, provides key insights into the financial goals of this underserved group, and offers some useful information on how employers and financial planners can best support them on their journey to building greater knowledge and wealth.
Approximately two out of three (67%) women of color said they were actively forging a more secure path while avoiding the financial behaviors they witnessed when they were growing up, the survey said. In addition, 67% of women of color felt confident in their ability to earn money, and 50% said they also were confident in the direction their lives were heading.
And compared with their white counterparts, more women of color were likely to feel confident in their ability to meet long-term financial goals (48% vs. 38%). They also were more likely to approach investing with a risk-taking mindset (31% vs. 23%) and with slightly more confidence (27% vs. 23%).
Where women of color still have opportunities
Still, the research reinforced that opportunities continue to exist in closing financial gaps and getting professional financial planning and investment guidance. For example, the data showed that only 28% of women of color reported feeling confident about their financial planning and investments, compared to 53% of their male counterparts. Additionally, 42% did not believe they were taken seriously by financial professionals because of their race or gender, which is far more than other gender, racial and ethnic groups surveyed.
How advisors and employers can help
Financial professionals can offer support in areas where women of color express unique needs and priorities, the survey said. Overall, the data showed that this group is more interested than their white counterparts in having generational wealth conversations (33% vs. 16%) and is more likely to prioritize offering financial support to a family member or friend (13% vs. 6%).
Women of color also prioritize values and cultural alignment more prominently when working with a planner, with 65% saying that these values are very or extremely important, compared with 45% of white women. Also, an overwhelming majority of women of color (91%) reported that it’s important for their financial planner to understand their values and cultures.
Employers that provide tailored financial advice and guidance solutions to employees – including women of color – may have a better chance of building trust, improving workplace satisfaction and security, and reducing turnover, the survey said. Employee resource groups can also be an effective conduit by creating inclusive, judgement-free communities where women feel comfortable in talking about their needs, and employers can provide curated, relevant content, the survey added.
“Our research revealed positive findings that women of color are more open to receiving financial advice and help, plus building generational wealth is a priority,” said Rose Niang, director of financial planning at Edelman Financial Engines. However, she said, “the survey also showed that women of color are underestimated, with many reporting not being taken seriously by financial professionals. As an industry, there is an enormous opportunity to reach more women of color by creating a more inclusive and diverse environment.”
One way to capitalize on this opportunity is to create a career path for more female advisors of color, Niang added. Some clients find comfort in working with someone they know who will understand their unique needs and provide a judgement-free zone to open up about their personal situation and goals. With only 1.7% of Certified Financial Planners being Black and only 2.7% of them Hispanics, the industry needs to find ways to attract and elevate more women advisors to better serve this growing client group, she said.
Also, women of color are looking for a financial planner they can depend on as a trusted source who will take the time to educate them and bolster their financial confidence.
“I always advise people to find an advisor with the heart of a teacher,” Niang said. “Taking the time to educate them is perceived as a step to invest in the relationship and build trust with the client.”
Additionally, women of color are nearly twice as likely as white women to say it’s extremely important that their advisor understand their values and culture. In other words, “know me.” Advisors should be aware of some of the hidden cultural elements of their clients, Niang said.
For example, some family structures are a communal economy, Niang pointed out. With Black women representing one of the largest cohorts in graduate school, their earning potential is improving and they may have more extended family members relying on them.
“An advisor needs to understand and empathize with their financial commitments,” Niang said. “Instead of advising that the support cannot be done or should be cut back, the conversation needs to be framed around helping the client balance her family obligations, which may mean retiring later.”
Edelman Financial Engines set out to explore the unique stories and needs of women of color through extensive quantitative and qualitative research, with a focus on the ways in which employers can better support them on their individual journeys. The findings are based on an online survey of 2,000 men and women, ages 25-64, who identify as African American, Asian American, Hispanic, multiracial, and Caucasian, as well as interviews and mobile ethnographies with more than 60 women from across the U.S., who identify as African American, Asian American, Hispanic, Caucasian and multiracial.
Ayo Mseka has more than 30 years of experience reporting on the financial-services industry. She formerly served as Editor-In-Chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].
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