The U.S. population is 13.4% African American; however, only 5% of financial advisors are African American. While Black employees at financial institutions represent 13% of all staff, Black representation among senior positions fell from 2.87 % to 2.62% during the years 2007 to 2018.

With a public that has grown weary of corporate America's lack of progress with diversity, equity, and inclusion, and new research pointing to Black Americans' lack of trust in financial service providers, the financial services industry needs a new plan starting from the inside out.

Financial services is essential to the economic growth of America. The services, products, and advice provided enable individuals and families to grow in financial knowledge, improve financial decision-making, and save and grow wealth. Lack of trust in financial services stemming from institutional bias is a primary contributor to the racial wealth gap in America.

The American College Center for Economic Empowerment and Equality conducted the Black Women, Trust, and the Financial Services Industry study in 2021, finding 60% of respondents expressed difficulty locating financial professionals or advisors they trust.Another study, conducted by Edelman in 2021, revealed that "the majority of Black Americans say they've experienced systemic bias and discrimination across all industry sub-sectors."

Financial institutions are awakening to the economic opportunity from building a relationship with Black America. JP Morgan has committed $30 billion to address racial inequality. Goldman Sachs has committed $10 billion to build trust with Black women. Citi and the Citi Foundation have already invested over $1 billion in their three-year plan to close the racial wealth gap.

Initiatives across the industry have launched with fervor focused on investing in Black communities, increasing access to financial education for Black Americans, and providing increased access to capital for Black entrepreneurs. Yet, solutions to address the lack of Black leadership within organizations are not as easy to find.

"Organizations need to look at their hierarchy from the bottom up," says Karim Hill, executive director for the Center for Economic Empowerment and Equality. "Building trust with Black America can only succeed if you are also committed to building trust with Black professionals within your organization."

In Spring 2022, the Center for Economic Empowerment and Equality will launch the first Black Executive Leadership Program, an innovative approach to executive education designed to open dialogue, identify gaps, and remove the obstacles to advancement for Black professionals within financial services organizations.

The Black Executive Leadership Program is about building trust between Black mid-level managers, the program's fellows, and white senior-level executives, serving as the program's sponsors. Black business leaders facilitate the program, and because they have lived similar experiences to the fellows, they can help guide discussions about racial bias.

Building trust requires three components; competence, sincere interest in the issues and concerns of others, and consistency in effort, meaning you need to want to build a relationship. The Black Executive Leadership Program builds competence with a rigorous curriculum, incorporating advanced behavioral, interpersonal, leadership, and technical financial skills. The forum allows sponsors to impart their wisdom regarding networking and leadership. In return, fellows feel safe to share their experiences, challenges, and perspectives as Black professionals in their organization.

Fellows are selected for their demonstrated potential to lead at an executive level and sponsors, for their eagerness to be a bridge towards change. Through connection and candid conversation, a relationship is born. Through greater understanding and acknowledgment of the issues, agreed-upon action is initiated. The desired outcome is lifelong connections between fellows and sponsors, career advancement for fellows, and meaningful and lasting organizational change.

"Critical to the program's success is ensuring connections last, and the wisdom shared grows and expands long term," explained Martha Fulk, PhD, program director for the Center. "It's about creating a community. Fellows are equipped with the means and platform where they can continue to network and share their experiences with other fellows long after they have completed the program."

Since the Center announced the development of the Black Executive Leadership Program, interest from the industry has been very positive. Truist Financial Corporation donated $500,000 to the Center for Economic Empowerment and Equality, with the first cohort’s in-person events occurring in Charlotte, North Carolina.

"The Black Executive Leadership Program has the potential to advance multicultural success in the financial services industry by serving as a pipeline through which up and coming Black professionals can gain the insight and support they need to advance their careers," said Fulk.

The Black Executive Leadership Program is part of the Four Steps Forward initiative developed by the Center for Economic Empowerment and Equality to narrow the wealth gap for underserved communities, beginning with Black America. Through research, course development, programming, and scholarships, the Center seeks to infuse a perspective of "do well by doing good" in the financial services industry, nonprofit organizations, corporate America, and government agencies.

Learn how you can get involved in helping to narrow the racial wealth gap and create economic justice for all here.

These underlying causes are complex, but can be partially explained by the prevalence of high-risk factors like obesity, respiratory diseases, and diabetes, as well as economic factors such as lower rates of health insurance and inadequate hospital resources.

A COVID-19 illness can be significant and prolonged, causing financial hardship to families due to loss of the income usually earned by the patient while they’re ill, permanent loss of income if they pass away, and incurred debt from medical costs related to any treatment. In addition, while the long-term health effects of COVID aren’t yet fully known, the Mayo Clinic reports that the permanent organ damage suffered by many COVID patients increases the likelihood of developing significant illnesses in the future, such as heart failure or other heart complications, pneumonia and long-term breathing problems, stroke, seizure, Parkinson's disease, Alzheimer's disease, and a higher probability of developing dangerous blood clots.

Financial advisors should be mindful of the impact of the effects of the pandemic, particularly to provide strategies to protect lower-income families against financial ruin. Advisors, who are well aware of the risks of failing to plan, should be mindful that those risks are more pronounced at present.

The potential for financial insecurity is staggering: More than half of adults under age 64 don’t have a will. In lower-income communities, the numbers are even lower, with only 55 percent of families with household income $75,000 or greater having a will, and only 31 percent with household income under $30,000 having a will. For minority populations, only 28 percent of non-white adults have wills compared to 51 percent of white adults.

These statistics are more cause for concern among low-income populations, who, without a financial plan, are at higher risk of negative financial impact from the long-term illness or death of an income earner and related medical expenses.

Financial planning does not need to be a costly endeavor. The following are some low-cost planning strategies that can be implemented to protect clients. If your client is also a member of a minority population, cultural sensitivity, including multi-lingual offerings, will also be necessary to integrate into an advisory plan.

Healthcare planning. If your clients are young and healthy, they should explore options for obtaining health insurance. In addition, the long-term health impacts of COVID-19 bring long-term care planning to the forefront. Long-term care insurance adds another layer of protection to protect against overwhelming debt due to costs from a prolonged illness. Such insurance covers costs that may not otherwise be covered by health insurance, such as nursing home costs, custodial care, and care for assistance with daily activities like bathing and getting dressed.

In addition to insurance coverage, clients need to plan for incapacity. This includes formalizing a client’s wishes about their medical care in the event they are incapable of making those decisions. In the most severe COVID cases, the patient is put on a respirator or ventilator and may be sedated or unable to speak, in which case a predetermined plan of action would be critical. A living will, also known as an advance medical directive, is a document that details the client’s wishes about treatment options for end-of-life care. Similarly, a Physician’s Order for Life Sustaining Treatment, or POLST, is a document created between a patient and physician discussing end of life treatment options. A springing durable power of attorney for health care appoints an individual to make healthcare decisions for the patient during the time when they may be incapacitated. Lastly, a Do Not Resuscitate Order (a DNR) advises emergency healthcare providers to avoid resuscitative measures. An attorney must be consulted for preparation of the will and powers of attorney.

Income protection. Income protection measures should be taken to protect against a long-term illness or death of an income earner. The loss of income is particularly impactful in lower income communities for a couple of reasons. Research by the NY Fed shows that higher density households have markedly higher rates of COVID-19 cases. Moreover, where the number of individuals living in each household is higher, more individuals may rely on the income earners, multiplying the financial loss of one death.

Disability insurance. Short- and long-term disability insurance can protect against some loss of income if a person suffers a long-term illness from COVID. Disability insurance is particularly important for single-parent homes or one-income homes.

Life insurance. A whole life insurance policy or a term policy can provide financial security if the income-earner passes away from COVID. There are several planning goals that can be accomplished with a death benefit, including:

• A term policy can provide a “safety blanket” while an income-earner may be exposed to COVID, particularly for essential workers and healthcare workers.
• A term policy can replace lost income for an income-earner who is caring for minors for the time period until they reach the age of majority or graduate college and can gain employment.
• A term or whole life policy can provide funds to care for dependents in the event that the primary caretaker passes away.
• A term or whole life policy can provide funds to satisfy the debts of the decedent, including funeral costs and debt related to the decedent’s last illness, which may be prolonged and significant due to COVID,

Estate planning for property. A low-income individual may not have significant assets to pass wealth, but that doesn’t mean estate planning for property is irrelevant. A will can protect the decedent’s assets against estranged family members who may have a legal claim under the state’s intestacy laws. In addition, if the client has minor children or dependents, a will can name a guardian and establish a financial foundation to provide care for the children/dependents. The primary residence is typically the most significant assets that individuals own, and in fact, 54 percent of wealth owned by Black households is made up of home equity, so planning for the transfer of the home is crucial. If the client is not married but has a partner they would like to provide for, a will can provide assets for the surviving partner or ensure they can remain in the home for the remainder of their life or for a term of years, after which the home can pass to the client’s children or other family members. Unmarried partners would otherwise be ignored under the state’s intestacy laws. Lastly, a power of attorney for property can be created so that another individual can access bank accounts to pay expenses in the event that the COVID patient is incapacitated.

There is a cost to providing this security, which can be an obstacle for lower-income families to seek professional advice. Even for small estates, an estate planning attorney’s services can run between $1,000 to $5,000. However, many states offer pro-bono community services through legal aid or state bar associations.

Some community organizations offer services to help advance financial education and access to resources relating to financial planning – as the AKArama Foundation did recently with a free webinar targeted to help Black people in the context of the pandemic threats. Partnering with communicating organizations could help advisors develop stronger relationships and establish trust with individuals new to financial planning.

The Centrality of Small Businesses in the U.S. Economy

According to the Small Business Administration’s 2020 Small Business Profile, there are 31.7 million small businesses in the United States, including six million from communities of color. The small business sector has a significant impact on the economy, comprising 99.9% of all business and employing 60 million people. Small businesses' survival and growth is vital to the growth and sustainability of the U.S. economy.

COVID’s Impact on Small Businesses and Especially Minority Owned Firms

Additionally, McKinsey Consulting reports that Black and minority owned business have a much higher failure rate than the national average, mostly due to undercapitalization of the business. A working paper from Fairlie (2020) reports recent data from the National Bureau of Economic Research indicating small businesses have been hard hit by the pandemic. Active business operations dropped by 22% during a two-month period between February and April 2020, with black-owned businesses down 41%. Other minorities were also harder hit than the average. Data from the New York Federal Reserve paints a similar picture. The Small Business Credit Survey found minority business owners hit much harder than average. Overall results indicated 57% of firms characterized their financial condition as “fair” or “poor”. Unfortunately, this figure jumped to 79% for Asian-owned firms, 77% for Black-owned firms, and 66% for Latin-owned firms.

While we don’t yet have data on the connection between small business survival rates and access to a personal financial planner, one area of further study should be whether financial advisory relationships have improved outcomes for small business owners. Moreover, studying the characteristics of those relationships, such as the length of advisory services, whether services began prior to small business formation, and how comprehensive the advisory work was could provide qualitative research details to facilitate small business sustainability.

Financial Planning is Important for Entrepreneurs and Small Business Owners

Entrepreneurs have unique qualities that set them apart, whether it's family relationships, personal and business goals, economic and noneconomic goals, and behaviors and attitudes. Providing financial planning services for entrepreneurs and small business owners can be both challenging and intellectually fascinating at the same time. The intertwined business management, personal relationships and firm ownership issues and goals create financial planning complexities, rendering the advice of an advisor particularly valuable. Indeed, researchers that study this topic found that women entrepreneurs' access to capital was predicated more on the quality of their personal finances than the assets of the business.

Central to theirs and other findings was that a significant contributing factor in the failure of entrepreneurs was the inadequacy of their personal capital, personal liquidity shortfalls, and poor personal tax planning. This finding could lead small business lenders and those who serve women entrepreneurs to include personal financial planning services as part of the portfolio.

Small Business Advisory Services as a New Market Opportunity

The guiding assumption in financial planning and counseling is that those who use the help of a financial professional to build and implement a goals-based plan will ultimately achieve success. Most would agree that's best done by working with a financial professional that understands the business and personal goals and objectives of the individual or entrepreneur. Many financial planners are looking for ways to build their client base, and opportunities to market to potential client segments that they feel might be lucrative.

From a business standpoint, entrepreneurs (family and non-family businesses, and solo operators) can be an important source of business for planners, mostly due to their complex situations. Most practitioners and researchers point to the intertwining nature of an entrepreneur’s personal goals, such as retirement and estate planning, coupled with business goals such as firm leadership and business development. Many financial planners are also looking for ways to contribute to societal value. Advising underserved individuals and communities would advance these dual goals.

What You Can Do Next

• Keep in mind that many small businesses, especially minority owned, are struggling right now just to keep their doors open. If that’s the case, find some businesses in your community and help them by being a cash-flow thought partner to help them stay afloat until things improve. Don’t underestimate your abilities as a business person. You may not know their business, but being available to help them make good decisions could open new doors and pivot opportunities. As the economy recovers, long-term planning services can be integrated into the relationship.
• Most communities have non-profit organizations that serve small businesses and entrepreneurs, such as the Small Business Development Centers, sponsored by the Small Business Administration. Some specialize in underserved groups. Establish relationships with these associations to offer financial planning or education services to their members. Services could include group-based education seminars about the importance of financial planning in their business. Some accept volunteers to serve as mentors (for example, Pacific Community Ventures). Small steps such as establishing an emergency fund, or finding a good CPA to help with taxes can reap big rewards.
• Consider beginning with Pro Bono services, and once the business recovers and starts to grow again, then slowly develop a trust-based long-term relationship that enables mutual financial benefits.

Conclusion

Small business survival and growth are vital to the sustainability of the economy. Improving access to personal financial planners could be an important factor in the mission to help close the racial and gender wealth gap. Advisors can play a vital role, and simultaneously develop a new market at the same time.

As former Supreme Court Justice Louis Brandeis once said, “The most important office, and the one which all of us can and should fill, is that of private citizen.” Wise words from a Kentucky native like myself.

Once we count the votes, what comes next? The American College of Financial Services remains focused on how governance affects wealth building, small business planning, Social Security claiming, and more.

Our expert faculty is on the pulse of market thinking – both how it’s priced into the pre-election environment, as well as how it may react to President Donald Trump’s re-election or a change in power to a Joe Biden administration. Faculty continues to assess the potential of additional fiscal stimulus, a CARES Act 2.0, and how it could impact many of the areas noted above. There’s also issues like how the next President may maintain or alter 401(k) vehicles, or how executive and legislative control may affect retirement planning. We already have a November 12 webcast on the calendar to discuss the possible effects on Social Security, Medicare, and other vital support programs. Make sure to join Adjunct Professor of Advanced Planning Steve Parrish, JD, RICP®, CLU®, ChFC®, RHU®, AEP®, American Retirement Association researcher Jack Towarnicky, MBA, JD, LLM, CEBS, and Sandy McCarthy, President of Retirement Services at OneAmerica, for this engaging discussion. CFP® and College CE are available.

The 14 ½ Conference of African American Financial Professionals (CAAFP) was an overwhelming success, shattering all records for the annual event. We're excited to announce that the largest conference of Black financial services professionals is back with more timely, relevant knowledge, including the first CAAFP breakout session, sponsored by Nationwide, on Thursday, November 19. It will feature insights on the Election from Donna Brazile, veteran Democratic political strategist, as well as Ramesh Srinivasan, Professor at UCLA's Department of Information Studies, and Director of UC Digital Cultures Lab, discussing artificial intelligence, proxy discrimination, and the Election. Sign up now.

When the dust settles, we are the educational partner with answers to your most important question: “What does this mean for my clients?”

Across 16 Presidents, The College has delivered the applied knowledge professionals need to grow their business, and their clients need to support their families and build out their retirements.

We stand ready to do that again – not just with our professional designation programs, but through webcasts, white papers, blogs, infographics; anyway we can convey the knowledge you need, when you need it.

Washington, D.C. makes law, then you’re responsible for putting strategies into place that help your clients achieve their financial goals. We’re that intermediary that synthesizes the laws, rules, regulations, and policy proposals into actionable information. It’s a great illustration of our belief that knowledge should always be at the intersection of academic and applied – rooted in theory and explained in practice.

Happy Election Day Month

Strategically, this meant a shift away from a correspondence model to an embrace of innovation complete with a new learning management system and a new Personal Pathway™ learning model that puts the student in charge of how, when, and where they learn. COVID-19 will only accelerate the transition from in-person to online education in the future, and it’s a trend The College is out in front of thanks to our investment in the student experience.

This also required us to re-think who we consider our potential student. Typically, our student has been a traditional financial professional, generally a white male. Now, through The American College State Farm® Center for Women in Financial Services and The American College Penn Mutual Center for Veterans Affairs, The College is educating and empowering the profession’s female agents, advisors, and future leaders, as well as our nation’s heroes starting a second career of service.

We are also aiming to increase industry diversity through our African American Scholarship Program and HBCU Student Scholarships, and will continue to promote leadership education and recruiting and retention efforts for Black professionals and other underrepresented groups through The College’s new Center for Economic Empowerment and Equality.

We also continue to see growth outside of financial services with an increasing number of nonprofit executives and fundraisers earning their Chartered Advisor in Philanthropy® designation. So, as you can read, our students are more diverse – by race, gender, age, and job function.

This sea change is strategic. The College is a financial knowledge institution, not a financial services institution. This opens avenues to spread knowledge to anyone and everyone who wants and needs it.

Case in point, on November 19, I’ll participate in three events: OneAmerica’s® Leading Tomorrow Speaker Series, the first Conference of African American Financial Professionals Breakout Session, and a program with The National Capital Gift Planning Council (NCGPC).

I’m honored to be part of a speaker series that includes experts on generational planning, Alzheimer’s, and IRA distribution strategies. OneAmerica® and its Chief Executive Officer Scott Davison are also passionate believers in The College, and Scott currently serves as the Chairman of our Board of Trustees. I will speak to members of the OneAmerica®  distribution network about racial and economic equality for Black America and the diversity and inclusion initiatives at the forefront of The Center of Economic Empowerment and Equality’s Four Steps Forward plan.

We successfully held a virtual version of The Conference of African American Financial Professionals this past August, and in an effort to continue the fellowship and learning beyond the event, we’re holding the first breakout session with accomplished leaders in politics and artificial intelligence. I’m proud to help introduce Donna Brazile, veteran Democratic political strategist and Fox News contributor, and Ramesh Srinivasan, Professor at UCLA’s Department of Information Studies and Director of UC Digital Cultures Lab. It should be a fantastic post-mortem of the Election and a look at how AI is influencing financial services.

Finally, I’ll speak to the NCGPC about how to harness philanthropy’s power for tangible impact. I’m currently going through our CAP® program myself because I understand the immense value  this knowledge can have on my community and The College’s efforts in this space.

Talk about a day that extenuates The College’s transformative path – conversations with agents and advisors, the Black financial professional community, and today’s nonprofit leaders. I’ll continue to spread the word of our work to benefit society, and help amplify The College’s noble cause to all it helps empower.

To end 2020, I sat down to answer four pressing questions summing up The College’s 2020. I touched on technological advances, a renewed focus on transformative e-learning, and the potential outcomes The College can foster in economic empowerment and equality.

First, I discussed the strategic sea change in The College’s delivery of applied knowledge. The two cornerstones of that strategy are Brightspace, The College’s new learning management system, and Personal Pathway™, its new learning model now available through the Chartered Financial Consultant® (ChFC®) designation and CERTIFIED FINANCIAL PLANNER™ (CFP®) education programs, as well as several courses in the Chartered Life Underwriter® (CLU®) program.

Instead of outlining features and benefits – visit the program pages above to view the highlights – I looked into the future to help the financial advisor, life insurance agent, nonprofit fundraiser, or executive leader understand what this shift in thinking and execution will mean for them.

Listen to the short interview below, and make sure to subscribe to this blog to remain on the pulse of new College initiatives.

To end 2020, I sat down to answer four pressing questions summing up The College’s 2020. I touched on technological advances, a renewed focus on transformative e-learning, and the potential outcomes The College can foster in economic empowerment and equality.

While these strategic successes are important to celebrate, they’re even more rewarding in the midst of a once-in-a-generation pandemic. COVID obviously has immediate impacts on our public health, the fabric of our communities, and the way we live. Long-term, the impacts will cascade down to the ways we learn.

The College is prepared to meet the learning needs of those who desire to absorb knowledge and pass it on to their clients, colleagues, and communities. Here are my thoughts on what’s next for knowledge delivery and how The College aims to meet the needs of the 21st-century learner. Listen to the short interview below, and make sure to subscribe to this blog to remain on the pulse of new College initiatives.