How Advisors Can Educate Themselves on the African-American Experience

A better understanding of your clients can help shift the trajectory of wealth-building for African Americans.


Differentiating between culture and race, understanding the innate need to support family, and prioritizing the next generation of wealth-builders are just a few ways that advisors can support African American clients.


Now, notice that I didn't say Black clients. There's a distinction.


I identify as an African American and a Hispanic woman. Yes, I am also Black, but the word is not enough to encompass my multifaceted background. You'll find that the same answer likely rings true for many of your Black clients or friends.


The African American experience in our country is rooted in the psychological and emotional tightrope that we walk in navigating life between a white-centric world while also honoring our history and culture. Doing so continues to affect our financial journeys; to better support us, advisors must educate themselves.


So, let's take a dive deep. There's a lot that can be done to shift the trajectory of wealth-building for African Americans.


Step 1: Understand That Not All Black People Are African American


The Black Lives Matter movement was a teachable moment for many in the nation and hopefully a wake-up call to acknowledge that the Black experience in America is different than the white one. This issue transcends civil rights or systemic racism, it also has an immediate impact on our financial journeys as well.


If we consider the Black diaspora in our country, it's clear that its pull is global. One can be Black and have their family originate from the Caribbean, Latin America, Africa, or beyond.


Culture cannot be distilled simply from a moniker. How Dominicans interpret money values differs from how Chileans or Puerto Ricans do. A shared language does not mean a shared culture.


For advisors, placing that truth front and center is a great way to help navigate the ins and outs of African Americans' money values. Take the time to ask your clients about their culture and upbringing through the lens of how they may affect their money values.


Step 2: Build Trust


To affect change with African American clients, advisors must familiarize themselves with the systemic oppression that has resulted in decades of economic decline and stifled growth. Consider the policy of redlining with home loans or how many families don't have the extra savings to help their children get a leg up with a down payment or a school loan.


Modern homeownership practices have roots in racism stemming from the introduction of single-family zoning policies, segregating white and Black neighborhoods, which then trickled down into public school systems. Although many laws have been passed in the past century, the problems still persist. A 2017 Economic Policy Institute report said it bluntly: "African-Americans have been shortchanged out of the materials to build wealth."


Let's dive even deeper here. White people, especially white men, stand the most to gain from the country's economic, regulatory, and governmental systems, whether they realize it or not. This is not an accident, rather because they have largely controlled those systems since their creation. Minorities, by contrast, have gained the least. As such, there is a great deal of trust-building to do to ensure that those who have been systematically disadvantaged can have their faith restored.


For advisors, take time to consider your own participation in, and the advantages provided from, these systems and proactively seek out additional sources and viewpoints to better inform yourself. And while speaking to clients, remind yourself that their experience with finances likely has been--and still is--different than yours.


Step 3: Acknowledge the Black Tax


As a first-generation college graduate, I bear a lot of responsibility and pride for my family.


Before I had my degree in hand, the assumption from my family was that I had made it, but I had four tough years ahead as I earned my degree and still needed their support. Once I graduated, I wanted to put my education to use right away as a professional, earning money to be able to give back.


But there was a burden that came along with my accomplishments. For many, being a first-generation African American wealth-builder likely means debt from student loans, a car, and other expenses accrued from those college years; it may also include additional financial responsibility from family members, as well as time commitments like helping elder relatives get to doctors' appointments.


There is a natural psychology around wanting to help those who have worked hard to make sure you and others in your generation were moved forward, including parents, grandparents, aunts, and uncles. We do this not only monetarily but also through the actions we take in the hopes that they contribute to the cessation of discrimination. In African American culture, we call this the Black Tax.


I know it well. By the time I had turned 26, I was outearning both of my parents. I yearned to give back in a meaningful way, to send thanks, and show gratitude, love, and appreciation.


It had also morphed into a new burden: Was I now considered the ultimate breadwinner of the family?


For many young professionals in the same situation, it can be hard to rejoice in a newfound financial freedom or success when your family members are still struggling.


Financial advisors must know how to navigate this dichotomy of clients saving for themselves while supporting loved ones. Instead of chiding clients for helping others in lieu of helping themselves, seek to find commonality. Advisors can help clients understand why they need to put their own financial oxygen masks on first before they can help the others in their circle.


Although I still wrestle with this concept, it has brought me comfort to specifically earmark money each month into a family fund that can be drawn down when needed. When that fund hits a zero balance, I can confidently say that I don't have the money to support them at the current time.


There is no doubt in my mind that other cultures face this same desire to help their family when put in the position to do so, and it is an advisor's responsibility to help them achieve that goal.


For advisors who are helping first-generation wealth-builder clients navigate through this fragile environment, helping them establish a family fund can solve myriad problems by keeping clients focused on their own well being while financially providing for family and emotionally providing for themselves.


Step 4: Put This Knowledge to Work


Another important element for African American clients is to emphasize how critical cash flow is to their plans.


The Certified Financial Planner curriculum is centered around high-net-worth people and includes many tools to help pre-retirees and those who already have amassed wealth; it falls short on tools to deal with first-generation wealth-builders.

To do so, we must be laser focused on these clients' prime earning years.


I am passionate about a tool called YNAB, which helps me create a flexible, fluid, and customizable road map to understanding each of my clients' cash flow. It is a process, and the tool has a learning curve. However, it's time worth spent given that understanding cash flow is the core of any financial plan.


Advisors might also elect to create their own cash flow spreadsheets to help navigate this conversation.


Beyond highlighting the benefits of cash flow, we must emphasize problem solving. To do so, I urge you to:

  • Lead with compassion: Ask your clients if there is anyone else relying on them financially outside of their immediate family to open up conversations without judgment.

  • Be relatable: The best advisors can demonstrate the same amount of competency by explaining things in plain English. Talk directly and resist the temptation to throw around complicated phrases.

  • Earn their trust: By letting clients know that you are on their side, you can avoid major financial missteps and secure your relationship in a more meaningful way.

Figuring out how to make everything work in their favor is our job.


Mission Critical: Advisors Must Educate and Support


As we continue to peel back these layers in an effort to move the next generation of wealth-builders forward, we must focus on helping our African American clients better understand how finances work and be supportive in their goals to blend their old world with a new one.


Offer information that can benefit all generations of their family, like the importance of cash flow. Speak in plain English so you can secure that level of trust, and then they can do the same with their loved ones.


Support their desires to help their family without impeding their own growth, and without judgment.


Financial advisors have a great opportunity to make real progress with African American clients and future generations. Luckily, there are easy ways to make sure this critical mission is a success.


This article written by Rianka R. Dorsainvil, CFP® originally appeared on Morningstar.com.

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