Minority Representation Among Financial Advisors
In 2019, the CFP Board revealed that only 3.8% of CFP licensees were Black or Latino, even though they make up about 30% of the U.S. population. Rogers cites what he thinks are several reasons for the low minority representation. Many clients of wealth advisors are former classmates, friends of the family, or others within someone’s personal network, and most African-Americans don’t have the benefit of a well-heeled circle. Unconscious bias in potential clients, who may have trouble envisioning someone of color handling their investments, is also a contributing factor.
There is also income inequality, which hits minorities the hardest. “The racial wealth gap in this country has widened over the last 70 years, even for college-educated blacks,” he says. “Many African-American communities have minimal exposure to the financial markets because they haven’t been able to accumulate wealth.” It would help, he says, if large corporations that offer financial advisory services to their senior executives as perquisites use advisory firms with ample minority representation.
Mistakes And Investment Lessons Learned
Rogers says some of his portfolios lagged in expected performance in 2008 and 2009 because they held newspaper stocks. “At the time, we believed newspaper companies would recover from the challenges of the internet,” he says. “But they didn’t.” He admits the firm underestimated the drop in revenues due to classified advertising declines, as well as the drag of debt burdens on these companies from their acquisitions.
He also says Ariel relied too heavily on credit ratings, which may not always provide a clear picture of a company’s financial health. Consequently, Ariel started doing more of its own balance sheet and debt research instead of using Moody’s or Standard & Poor’s. “We use the rating agencies as more of a sanity check than a primary research tool,” he says. “This allows us to build in a better margin of safety in our analysis.”
Emerging From The Pandemic
Rogers believes U.S. stocks will overcome the obstacles created by Covid-19. The Federal Reserve has taken actions such as cutting rates to zero, committing to the purchase of investment-grade and high-yield corporate bonds, and other measures that suggest the central bank will do whatever it takes to support markets and the economy. Legislative initiatives have also been encouraging.
“We expect a solid recovery for equities and earnings as early as the fourth quarter of 2020 or first quarter of 2021,” Rogers says. “Meanwhile, we stand ready to take advantage of any pullbacks in the market on negative news.”