By Frances “Toni” Draper
AFRO CEO and Publisher
In the Summer of 1976, my husband and I embarked on a job search, for a variety of reasons. Having managed the New Jersey office of the AFRO for two years, we decided to return to our hometown of Baltimore. With our daughter just six weeks old, we sought positions that would be less demanding and more suitable for our new roles as parents.
One day, we stumbled upon an advertisement for a brokerage firm’s open house. Intrigued, we decided to attend. To our surprise, after a brief company overview, guests were invited to apply and interview on the spot. It was mid-August, and my husband, wearing shorts, stood out among the more formally dressed attendees. I, however, was dressed professionally, albeit in one of the few outfits that fit me well post-delivery. Following a 15-minute conversation, I was invited for a second interview right away and I was eventually hired as an account executive.
Despite lacking a background in finance or investments, I possessed the necessary people, analytical and communication skills, with the assurance that I could learn the financial aspects through their comprehensive, yet intense, training program. Thus, I embarked on eight-week training course in New York, learning about stocks, bonds, mutual funds, real estate investment trusts and more. It was a challenging time, cramming in unfamiliar information, but I persevered. I studied diligently and was among the seven out of approximately 200 who passed the grueling six-hour, no-calculator, multiple-choice examination. It was quite the journey!
Growing up, my grandparents and mother instilled in us the importance of “saving for a rainy day” and paying bills promptly. Yet, it was a real eye-opener realizing how little I knew about finances beyond basic savings before I undertook this training. And most of my friends, college-educated or not, were in the same position. Once I started in my new position as a stockbroker, it was even more apparent that most Black families were not involved in the stock market. I had very few Black clients and many of my friends and family had no interest in learning about the stock market, preferring to invest in what they considered to be safer investments i.e. savings accounts.
Even today, the investment landscape in the United States reflects a significant discrepancy between White and Black families, as highlighted by a 2019 Pew Research Center analysis of Federal Reserve data. The study revealed that 61 percent of White families reported owning stocks, directly or indirectly, compared to only 31 percent of Black families.
This disparity stems from several core factors. Income and wealth disparities play a pivotal role, with White families enjoying higher average incomes and greater accumulated wealth, affording them more resources for stock market investments. Additionally, educational attainment is crucial, as White Americans, on average, achieve higher levels of education, leading to higher incomes and greater financial literacy, both key to stock ownership.
Access to employer-sponsored retirement plans also contributes to the gap, with White Americans more likely to have access to such plans, often including stock investments. Historical factors, including discriminatory housing policies and employment practices, have perpetuated wealth disparities, making it harder for Black families to accumulate wealth and invest in stocks.
Then there are differences in financial knowledge and risk tolerance. Some studies suggest that Black Americans may exhibit greater risk aversion, affecting their lower rates of stock ownership. Disparities in financial knowledge and access to financial advice further exacerbate the gap.
According to the Brookings Institute: “The racial wealth gap should be recognized as the consequence of discrimination, public and private, throughout American history and continuing to this day. Nearly 250 years of slavery were followed by a century of Jim Crow segregation and economic exploitation reinforced by state-sanctioned violence. Until the latter 20th Century, Black people were excluded from public programs to encourage home ownership and higher education. Black people often receive lower valuations on their homes and earn less money compared to White people performing the same work. Biases in public investment and criminal justice leave Black communities simultaneously underserved and overpoliced, and these civil rights violations also have serious economic consequences.”
Addressing these disparities requires a multifaceted approach, including efforts to reduce income and wealth inequalities, improve access to education and financial literacy, and promote policies ensuring equal access to investment opportunities.
Some of these topics are addressed in this special financial literacy edition of the AFRO. Thanks to managing editor Alexis Taylor and her team, as well as our advertising, production, finance and web teams for their hard work.
The articles are timely and well written on a variety of subjects including “Learning to navigate and manage medical debt,” “Transferring generational wealth” and “Finance tools you can use,” to name a few.
It is our hope that you will not only find these articles relevant to your own financial journey, but that you will pass the information on to your friends and family.
