Financial advisors looking to increase the diversity among their clientele may benefit by including entire households in the formal planning process for retirement, in lieu of just focusing on the client, according to findings in a new study by LIMRA Secure Retirement Institute.
Black Americans are slightly (33 percent) less likely than the U.S. population (37 percent) to be working with a financial advisor, but they are a;sp less likely to consult with their advisor before making financial decisions about their retirement, according to the report, Black Americans and Retirement Planning: Bridging the Advice Gap. “In general, black Americans are more likely to consult immediate family members for financial advice,’’ the report concluded.
Marilyn Mohrman-Gillis, the executive director of the CFP Board Center for Financial Planning, is not surprised by the report’s findings. She pointed out that the Center recently conducted a survey focused on racial diversity and the barriers that financial advisors face that determined that clients displayed both implicit and explicit biases in choosing an advisor.
“Essentially, it showed a like-to-like preference, that is people would tend to choose people from similar economic and racial background, religion, or sexual orientation," she said. “Part of it is they have to see more advisors who are a part of their community.’’
The bigger issue, as noted by Mohrman-Gillis, is the underrepresentation of racial and ethnic diversity in the financial planning profession. “It goes to what we are trying to do … diversify the ranks of financial advisors so that the they will have clients that can relate to them and work with them,’’ she said.
Mohrman-Gillis made clear that she is not suggesting that black Americans only want to work with black financial advisors or vice versa. “All Americans need to have access to competent advice. But we need to have choices,’’ she said.
The LIMRA survey also found that black American pre-retirees are less likely than other pre-retirees to have completed key retirement planning activities, such as calculating the amount of assets they need to have available to spend in retirement (29 percent versus 44 percent), or developing a specific plan or strategy for generating income from retirement savings (15 percent versus 28 percent) than the general population.
Researchers, however, found that black Americans show a greater willingness to learn more about products and services that can help manage their financial priorities and enhance financial security.
Black Americans also voiced a greater concern regarding lower levels of financial security. Half of all Americans feel less financially secure, while 4 in 10 black Americans felt that way, the study found.
The study found that there is a minimal difference in ownership of insurance, according to the 2018 Barometer Insurance study. Sixty percent of black Americans own life insurance compared to 59 percent of all Americans. Additionally, the research found that there was no difference (68 percent) between both groups when identifying with the sentence “I personally need life insurance.”