Multiple firms say they want to entice an untapped market of Black investors who could bring billions into their firms by attempting to break down walks of distrust and reduce education gaps that have been building for years. 

Many Black investors are first-generation wealth, meaning they are the first in their family to start to build wealth, said Delvin Joyce, a Black American financial planner at Prudential Financial in Newark, NJ., as well as a former NFL running back. They are no longer burdened with having to pay off debt left behind from previous generations, he added.

“They’re educated, they have great jobs and make a really good income, but they just haven’t crossed the threshold yet toward building wealth,” he said. “Because maybe their parents didn’t have wealth, or they are still trying to recover from the generational poverty that has impacted many Black Americans.” 

A recent report from the McKinsey Institute for Black Economic Mobility estimated that firms could potentially generate up to $225 billion in new assets through 2030 if they offer products and services specifically geared toward Black investors. 

Black investors do not avail themselves of the financial services industry because of a lack of education or understanding about investing, aversion to risk, and a lack of trust with large financial institutions, said Kelly Johnson, a Black American and a portfolio manager of fixed income at Charles Schwab Investment Management.

Joyce and Johnson, who are both Black, said this lack of education stems from attitudes at home as well as the perception of the financial markets. Growing up, Johnson said he routinely heard that investing was “only for white people,”while Joyce said that money is still a taboo topic in many Black households.

“Because there were not a lot of conversations in most cases about money in the household, many Black Americans are having to seek the help of a financial professional to guide them because a lot of this is unchartered territory for them,” he said.

As for a lack of trust, that is something that is growing among all investors regardless of race, according to both men.

“People are skeptical of large institutions,” Johnson said. “They don’t have the same trust as they once had as a culture and I think its really seeping over so it’s not just Black investors but all investors.”

Johnson said there seems to be a growing distrust of the financial markets that goes beyond just the Black community.

For example, since 1998, Charles Schwab has published the Ariel-Schwab Black Investor Survey, along with Chicago-based Ariel Investments, that keeps track of the percentage of white and Black survey respondents who own stocks.

In the first year of the study, the percentage of white respondents who owned stocks was 80% while the percentage of Black respondents who did was 60% The latest study, which came out in April, found the percentage of Black respondents who own stocks only dropped to 58%, while the number of white respondents who own stocks dropped to 63%.

“The level of Black investors has remained relatively flat, whereas the level of white investors has come down,” Johnson said. “It’s a weird trend where all people are equally skeptical now.”

To combat this lack of trust and education, firms are reaching out to these communities to help.

In February 2019, New York-based JPMorgan Chase launched Advancing Black Pathways (ABP), which is designed to help strengthen the economic foundation of the Black community, according to Seth Jones, regional director at J.P. Morgan Wealth Management. It has four key focus areas: careers and skill building, business growth and entrepreneurship, financial health and wealth creation, and community development.

“We have community managers [who are JP Morgan employees] that go out into the community to offer their educational programs,” he said. “It’s not necessarily based upon a level of assets but working to build up the entire community.”

The meetings are held at Chase branches, but community managers can also conduct them in more casual settings throughout the community. In addition, J.P. Morgan Wealth Management has been running a roadshow entitled “Building a New Legacy” that targets Black and Latina women. It offers them investing tips. Internally, the firm hosted the Black Advisor Summit last year, where JP Morgan Wealth Management advisors, leaders and executives met to discuss ways to better serve all their clients and grow their business.

Westlake, Texas-based Schwab is looking to diversify its own ranks by hosting recruiting events at major colleges throughout the country and offering scholarships to those interested in a career in financial planning. In the community, the firm is conducting the Moneywise America Program, where the firm trains its employees to provide education to the younger generation in the local community. The firm has also hosted seminars with advisors to help them diversify their firms.

St. Louis-based Edward Jones has rolled out its own Financial Fitness program that focuses on helping educate investors, so they have a clear understanding of the investment industry, according to Vanessa Okwuraiwe, principal of diversity, equity and inclusion at Edward Jones.

“[The program] aims to increase financial literacy for all through a digital education platform and learning experience,” she said in an email. “We’re prioritizing building financial strength and resilience to empower equitable growth across communities, especially those that are underserved.”

Prudential will be rolling out its own outreach program to the Black community this summer, although the firm is not disclosing any details about the initiative yet. The program will create more accessibility to Black advisors for potential Black investors so they can help them build a financial plan and protect their financial wellness, according to the firm.

When it comes to relating to Black investors, Joyce and Johnson said that what's more important than the race of an advisor is his or her ability to have empathy for where that person comes from.

“One of the reasons people don’t reach out to financial planners is because they feel embarrassed by some of the mistakes they have made,” Joyce said. “Coming from a general place of empathy might be more important than whatever your cultural background is.”

Joyce cited a personal example where a client once had to co-sign a loan for a family member because they were the only one in the family with adequate credit. While he normally might advise against cosigning a loan, Joyce said he understood the rationale behind it and would not judge the person for it.

“If I have a shred life experience with my client then I’m probably going to be less likely to judge them for mistakes,” he said.

Johnson agreed that the advisor should focus more on making their clients feel comfortable. There are simple things they can do, he said, such as hiring a diverse staff, or talking about certain topics that project the message that diversity is important to the advisor.

“These subtle signals for certain people can matter a lot in terms of feeling intimidated and maybe uncomfortable within their practice,” he said.