December 2021 Issue: 3 Steps Advisors Should take in 2022 to Close the Racial Wealth Gap-3 Steps Advisors Should take in 2022 to Close the Racial Wealth Gap by John Eing

3 Steps Advisors Should take in 2022 to Close the Racial Wealth Gap by John Eing

Pdf Summary

In this article, the author discusses the persistent racial wealth gap in the United States and proposes three steps that financial advisors can take in 2022 to help close this gap. <br /><br />The first step is to educate themselves and their colleagues about the financial mechanisms that underpin these disparities. They recommend reading a research paper called "Two American Financial Plans" that provides comprehensive evidence on the racial wealth gap. This includes understanding the long-term wealth disparities between Black and White households and the residual effects of redlining and other discriminatory practices in the finance industry.<br /><br />The second step is for advisors to take a more creative role in advising their clients. Many Black households are unable to access wealth management services due to high minimum asset requirements. To include lower-income people of color, firms can lower or eliminate these requirements, adopt retainer or project-based fee structures, and increase pro bono work. The author shares that their firm, Abacus Wealth Partners, has implemented these practices and encourages other firms to do the same.<br /><br />The third step is to build a more diverse profession by deliberately increasing diversity in new hires. Currently, only 1.5% of CERTIFIED FINANCIAL PLANNERS™ are Black. The author suggests actively recruiting from historically Black colleges and universities and participating in programs like the BLX Internship in partnership with NAPFA.<br /><br />While these actions may not solve all the challenges overnight, they can contribute to reducing the racial wealth gap for the Black community. The author emphasizes that closing this gap is not only a moral imperative but also a positive business move for financial planning firms. Furthermore, it is estimated that closing the gap would result in an additional $60 billion in revenue for the financial sector annually.<br /><br />Overall, the article emphasizes the role and responsibility of financial advisors in addressing the racial wealth gap and provides practical steps they can take in 2022 to make a difference.

Keywords

racial wealth gap

financial advisors

closing the gap

financial mechanisms

wealth disparities

redlining

discriminatory practices

wealth management services

minimum asset requirements

diversity in new hires