One-on-one client interaction has always been the lifeblood of financial advice. Whether via app, phone or video chat (especially in today’s environment), or face to face in an office or client’s home, that direct contact is vital to understanding where clients are coming from and best supporting them on their financial journey.
But our individual context is often informed by the communities we are a part of—friends and family, workplace, hometown, etc. Amid the current global pandemic, communities have become a source of strength for many. Yet the pandemic and resulting market turmoil are also laying bare financial fractures in communities across the country—from the widening wealth gap to job and housing insecurity.
In fact, according to the Prudential 2020 Financial Wellness Census, the first months of the Covid-19 pandemic largely wiped out three years of financial gains in the United States. More than half of Americans reporting their financial health has been compromised, and 14% have lost their job as a result of the outbreak.
Additionally, while 48% of all those surveyed said they were worried about their financial future, those disproportionately affected by the pandemic included people of color, women, younger generations and small business owners. Among Black Americans and Latino Americans, 56% said they were worried about their financial futures. And while 17% of all Americans reported being unemployed, that figure was considerably higher for those with household income under $30,000 (34%) versus those with household income of over $100,000 (8%).
To overcome these challenges, FPs can look to engage not only their current customers, but the broader community that surrounds them. Already, FPs have evolved beyond their remit as mere money or product managers to become financial counselors. But there are additional opportunities to build and develop communities that can have a meaningful, lasting impact on financial wellness. Here are three key activities for FPs to jump-start their community impact:
Engage Local Businesses
As FPs look to expand their impact in the community around them, look no further than small business to find the lifeblood of the Main Street economy.
Small businesses have been especially impacted by the current economic environment yet are a driving force in local communities. Research from McKinsey shows more than 50% of small business owners say that both their business and they themselves have been negatively impacted by Covid-19—and many are revisiting their financial strategies as a result. That spells opportunity for FPs to provide support that can shore up the backbone of local economies and reinforce communities in need of smart financial guidance in difficult times.
Providing meaningful support to local businesses comes through thoughtful action, such as engaging with the local Chamber of Commerce, hosting workshops for business owners to review strategies, or partnering with local business to lead community financial education sessions—especially critical given the financial challenges posed by the current pandemic.
Advocate Financial Literacy
The wealth gap in our country continues its divide at an alarming rate and impacts communities from coast to coast. Financial literacy is one of the best tools FPs have to help communities build a strong financial footing to help close the divide.
Minority communities are especially impacted by lack of access to financial education and literacy programs. In a report from the American Economic Association, using data from the National Financial Capability Study (NFCS), financial literacy scores for minorities were found to be 9-16 percentage points lower than of whites. That’s a challenge FPs are uniquely positioned to take on.