There are several reasons for the wealth gap between White Americans and African Americans. I have been fortunate to have relevant, authentic conversations with several financial planning professionals that acknowledge the need for a deeper understanding of cultural differences that inform the way that various people groups manage their finances, professional relationships and personal priorities. Cultural competence is the starting point; it must become a standard cornerstone of the financial planning process. Cultural competence is the ability to demonstrate in a practical manner a genuine understanding of historical and cultural influences that inform the experiences and responses of diverse population groups. The National Education Association states cultural competence is “having an awareness of one’s own cultural identity and view about difference, and the ability to learn and build on the varying cultural and community norms of students and their families.” U.S. Census Bureau statistics indicate that by 2045 the United States will become “minority white” at 49.7 percent of the population. Financial advisors must hone the cultural competence skill and financial planning clients must demand it.
An advisor building a culturally competent practice will emphasize three areas for continuous growth and development for the benefit of the client base:
- Self-awareness of own identity and experiences to include beliefs about finances, financial decision-making priorities, group identity privilege and discrimination;
- A deeper understanding of how government sanctioned institutional racism and historical events with respect to real and capital asset ownership, educational opportunities and restricted access to the full measure of citizen benefits shape minority perspectives on financial institutions and explain wealth and financial independence levels of various people groups; and
- Acknowledgement of the current trend of growing income and wealth inequality, the lack of access to financial services, as well as development of trusted advisor relationships built around a mutual appreciation of where the client is today, with empathy and respect for client perspectives.
Cultural competence must include the richness and resilience of historically financially marginalized minorities. For example, Americans of African descent have a rich history of storytelling, empire building and academic prowess that extends further back in our history than the 1600s on the eastern shores of lands in the Americas. The history of African Americans cannot and does not begin with the Middle Passage and freedom from chattel slavery. Collectively, the citizens of this country must reclaim the history of the nation’s diverse people groups through knowledge, and experience the joy and appreciation of research, storytelling and sharing that gives life to the stories of ancestors and preserves the futures of descendants.
Know that African Americans and women that served in the military during WWII were entitled to a wide range of benefits, the very same benefits that all returning WWII Veterans were entitled to, in accordance with the Servicemen’s Readjustment Act of 1944 (The GI Bill). Know that many African American veterans were encouraged by the Veterans Administration to take vocational training, rather than attend university, many were told there was no economic need for black skilled workers, therefore no need for education. Know that many banks refused to loan African Americans the funds for homeownership and restrictive covenants were commonplace. Know the detrimental effects of red-lining.
Also know about Mansa Musa.
Also know about the Buffalo Soldiers.
Also know about Richard Robert Wright, Sr.
Also know about the Tuskegee Airmen.
In the end cultural competence must become the rule…second nature, rather than an exception or something to intentionally integrate into a practice. The financial planning profession must wrestle with the history of this country to serve the diverse population of this country. In the past I have noted that thorough financial and life planning at some point along the way forces individuals to grapple with family dynamics, money, death, and much more. “Much more” includes our country’s history, how financial professionals reach out to segments of our population that have been historically deprived of opportunities and financial tools to build wealth, and the potentially implied shame imposed upon marginalized people groups for not having enough assets to fully participate in our growth economy. Census numbers suggest the financial futures of our country’s various people groups depend on financial planning professionals with broader, well informed perspectives on diverse cultures.
Validating and prioritizing wants and needs, being honest about proactively effecting change to reach goals, and expecting the need for modifications when necessary are starting points for ALL OF US.
So, financial professionals and clients: grab a history book. Diversity in financial planning starts with understanding history.
--Terry