White and Black Wealth Gap has Quadrupled...Why?
Wealth…this word means different things to different people, cultures and nations. Here we use the word “wealth” in context of what you own minus what you owe. Wealth also means you have the capital to start a business, buy a home, send your children to college, and ensure that you have an economically secure retirement.
If I had a candle wish, it would be that all African Americans and Hispanics understand that without wealth…families cannot become and remain economically secure.
While it is true that the 21st century has brought increased income in minority households… this did not lead to wealth accumulation.
New evidence reveals that the wealth gap between White (mainstream) and African American families has more than quadrupled over the course of a generation.
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The wealth gap between Whites and African Americans increased more than 4 times, from $20,000 to $95,000.
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91 percent of both African-American and Latino seniors face financial vulnerability.
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Nine out of 10 senior households of color do not have sufficient economic security to sustain themselves through their projected lives.
Research also reveals that more than three fourths of senior households of color (76 percent of African-American and 85 percent of Latino seniors) do not have sufficient financial resources to meet projected lifetime expenses.
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High housing expenses put six in 10 African-American and Latino seniors’ budgets at risk.
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Forty-four percent of African-American and 37 percent of Latino senior households are at risk with respect to home equity…meaning that they rent or have no home equity.
The Credit Union National Association – CUNA’s made the following statement to the in Senate Committee on Banking, Housing, and Urban Affairs on February 6, 2002. “There is considerable evidence that financial illiteracy has reached record proportions, and its impact has contributed significantly to rising levels of bankruptcy and to lowering the standard of living in general for many American families.”
What is alarming is that this statement was made in 2002, after almost 20 years of Financial Education offered in our schools and financial institutions. What is even more alarming is that the minority population did not benefit greatly from this proliferation of new Financial Literacy programs.
In 2010, two reports confirmed the facts stated above.
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Severe Financial Insecurity among African-American and Latino Seniors
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The Racial Wealth Gap Increases Fourfold
Source: The Institute on Assets and Social Policy ( http://iasp.brandeis.edu/ The Heller School for Social Policy and Management | Brandeis University | In collaboration with Dēmos | http://www.demos.org/ )
The Answers?
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Financial Literacy Programs (Non- Bias and Product Neutral)
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Multicultural Financial Services Professionals (Trained To Served the Underserved Communities)
Financial Literacy Programs - Effective
There are some who would argue that Financial Literacy programs would solve this problem. A proliferation of new Financial Literacy programs began in the 1990s and has continued.
The Student Loan Borrower Assistance Project (SLBA) which is a program of the National Consumer Law Center (NCLC) makes this statement at their website “It’s not surprising that so many financial literacy courses are funded by creditors. There is a shocking lack of evidence that financial literacy is effective…a number of studies show that financial management programs have no effect on literacy or behavior".
Financial Literacy Programs to be effective need to be Product neutral without the product spin…most are not. Insurance, Banks, Consumer credit and debt counseling agencies offer so call Financial Literacy courses that include everything from helping a consumer fix his finances to flim-flam outfits that charge high frees and leave a borrower in worse shape than before. Subprime lenders created “consumer advocacy” organizations and offered financial literacy advice. Insurance and Investment companies offer programs and workshops that invoke enticement to buying high commission products and services.
Irene Leech, former president of the Consumer Federation of America and a Virginia Tech University professor who focuses on consumer issues, agree. “All education offered by the businesses that sell the product they’re educating on is subject to bias,” she said. “These companies don’t dare hit the points that need to be hit hard enough – or they’d lose business – so their efforts are at best disingenuous and at worst, fraud.”
The providers of financial literacy programs were and still are a diverse group. The providers that have the propensity to deliver bias in programs are Banks, Insurance and Investment companies.
The providers that would tend to deliver product neutral information would be employers, state cooperative extension services, community colleges, faith-based groups, and community-based organizations. Non-Conflicted providers would also include Federal Reserve Banks, National Housing Institute, and the FDIC.
Multicultural Financial Services Professionals
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Minority communities need Financial Services Professionals not only trained in the skill sets to build, protect and manage wealth, but also those that share the culture sensitivity of the underserved population and those that can teach the uninformed and underserved how to direct income to wealth building strategies.
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Minority communities need more Financial Services Professionals that understand the importance of long term relationships with minority clients as well as the long term effects of solid wealth planning strategies deployed by clients from the underserved populations.
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Banks, Insurance and Investment companies need to structure compensation programs that would not penalize Financial Services Professionals serving the minority communities. These programs would recognize efforts and not penalize them for low production. This allows the professionals to concentrate on building wealth and not selling product.
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Bank, insurance and Investment companies must make a commitment to refrain from delivering low grade diversity insurance and investment advisors to the communities they serve. Competent, Credentialed professionals are needed in these deserving communities.
Wealth…this word means different things to different people yet we can all agree that is wealth that allows each generation to get better and live their lives to the fullest. The job of Financial Services Professionals is build, protect and manage wealth. We must do a better job of this in the minority communities…and we will.
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Jim Robinson posted on Monday, May 24, 2010
Tags: Retirement, Minority, Wealth, Underserved, African American, Latino, Hispanic
Posted in: Site News, Minorities
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