Black Wealth Summit highlights signs of change amid widening disparities

Wealth managers investing billions of dollars toward racial equity are confronting disparities that are growing worse in some ways even as there are some notable signs of change.

By sponsoring a virtual conference that’s a mix of an investment seminar, a motivational meeting and intentional outreach to Black clients and professionals, firms such as Morgan Stanley, Charles Schwab, Bank of America, J.P. Morgan Chase and Raymond James are trying to set a new course for the industry with a historically excluded group. This week’s inaugural Black Wealth Summit drew 1,800 clients, prospects and professionals.

In a “real talk” session with founder Cedric Nash, though, fund manager John Rogers of Ariel Investments cited studies by the St. Louis Fed showing that white households with college degrees tend to build wealth while net worth often declines among Black college graduates. The median and mean wealth of Black families is less than 15% of White households’ wealth, according to the Fed’s latest figures from last year. For Rogers, a longtime friend of the Obamas and former White House senior advisor Valerie Jarrett, the numbers speak to the need to support progressive political candidates and change company practices from the inside of boardrooms.

“We then have to look out for our friends in saying, ‘We want to introduce you to the white infrastructure that's making the decision on how money is getting spent,’” Rogers said. “They're not going to open up those doors themselves. They like to give us scholarships. They like to pat us on the head and give us what they call the ‘supplier diversity’ kind of low margin, least growing parts of our economy. But the real things are investment banking, the law fees, the accounting fees, technology fees, the media fees, all that stuff where the real wealth and jobs are created, where those doors are not open for us.”

Diversity and equality

Introducing Access Denied: Systemic racism in financial services

October 23, 2020 5:30 PM

Megabanks and giant wealth managers say they’re ready to help unlock those avenues into wealth. Morgan Stanley has launched an Institute for Inclusion, a Racial Equity Investing Tool Kit and a recruiting collaboration with asset managers, Head of Wealth Management Andy Saperstein said.

“We're working across the industry to build more awareness about careers in our industry and funneling talent into all our businesses,” he said. “It's important that investors can find firms that represent the whole society, the full diversity of society. And responsibility definitely doesn't stop inside our four walls. That's something that's really important for us to remember. It's not just Morgan Stanley. It's not just your individual firms. You have an obligation to society on the whole. And the only way that you really meet that obligation is by going outside the walls.”

Other firms highlighted their own actions and research around racial equity. At Bank of America, the firm last week hiked up its own minimum wage of $21 per hour for all U.S. employees on the path to $25 an hour by 2025, said Ebony Thomas, the firm’s senior vice president of environmental, social and governance. The bank will spend $1.25 billion “in communities of color” over the next five years, Thomas noted, alongside another $15 billion towards homeownership. The equity could help more Black Americans launch businesses, she said.

“This is the power of having property, where you can start from a position of equity, where you're taking something that you own and now creating another piece of property, a business that you own,” Thomas said. “And, oh, by the way, while you're doing that, you're going to the dentist, you're going to the doctor, you have primary care, all of those things, right? That stress level that comes with this wealth gap is real. And when you can close that stress level, that health level, you can now have the ability to amass and accumulate wealth.”

Younger generations of Black Americans are leading some of that shift, according to the latest annual edition of research commissioned for more than the past two decades by Charles Schwab and Ariel. At 63%, the share of people 40 years old or younger holding any stock is the equal among Black and White Americans with at least $50,000 in annual income, compared to wide differences among older households. Still, the survey suggests white Americans are saving more and contributing more to their 401(k) accounts, most likely due to the fact that they have more inherited wealth, said Schwab Ultrahigh Net Worth Senior Banker Willie Wheat.

“That, again, adds to this gap that continues to widen,” Wheat said. “We, as a whole, lack trust in financial services. And what was also interesting that the survey pointed out, too, was that once an African-American engages with a financial advisor, that confidence tends to increase and there's this restored confidence in the financial system.”

J.P. Morgan has pledged to spend $30 billion towards racial equity and hire 300 Black or Latino financial advisors over the next five years. The firm “didn't just begin the narrative because of George Floyd, but it enhanced the body of work that we were doing beyond something that was philanthropic,” said Christopher Thompson, J.P. Morgan Wealth Management’s head of diverse advisor experiences.

“It was really about this question: Are we interested in transforming this community, closing the gaps and making this a business priority?” Thompson said. “Beyond the business case, there's got to be something that you're leaning into that is around sustainability for the communities that we not just talk about, but the ones that we live in. And this conversation from a Black wealth perspective is one that really gets me excited, because we're doing some things that are actionable, that are measurable and that are sustainable.”