By Kleo Curry, first vice president—Wealth Management, UBS.
My grandfather was a Black businessman from Detroit who owned a string of barbershops, beauty shops, and real estate that was leased as a distribution center by the city’s leading newspaper. As a young girl in the early 1980s, I would often accompany him to collect the businesses’ earnings. If I got the count right, I would receive a small percentage of it as a reward.
It was through my grandfather that I first learned the value of being compensated for your time and efforts; he was certainly one of my original compasses in my wealth journey, which I have parlayed into a 20-year career in wealth management.
So, it should come as no surprise that helping investors build generational wealth is a passion of mine. For any investor growing their wealth or business, there are myriad aspects to consider in order to optimize the years before retirement. I view financial planning as part of one’s holistic health: Meeting with your financial planner is akin to your annual physical checkup. For investors of color, there may be certain nuances to contemplate. Let me explain.
Understanding Family Values
I’ve been asked how investors of color should consider their portfolio allocation during uncertain economic times. It’s important to understand that in a broad sense, their sentiment is not different from other investors. Black investors share the same fears of market volatility as anyone else.
But there are differences in how Black investors tend to allocate their assets on the whole. According to UBS’ Invest to Advance research, ultra-high-net-worth Black investors on average only allocate 26% to stocks—below the overall average for high-net-worth investors. The result? They may be missing opportunities to fully participate in the stock market.
To better understand why, we must employ cultural competency. In the Black community, real estate is a family value. Half of Black high-net-worth investors have been taught the value of owning property, with nearly six in 10 investing in real estate, income properties, and/or vacation rentals. Our research shows these investors believe real estate is likely to stay ahead of inflation and hold its value. This rings true to me, too. I bought my first home at the age of 26; it was the largest portion of my wealth as I’d only been investing in my 401(k) at that time.
At the same time, there is a mismatch between the need for culturally competent financial planning and the ability of the profession to provide it. Although the profession continues to grow, and with diversity, equity, and inclusion in mind, the number of racially and ethnically diverse professionals only numbers 8,715 out of 95,137 according to the Certified Financial Planner Board of Standards’ latest numbers.
Identifying the Lost Opportunities
Knowing, liking, and trusting a financial planner is critical to long-term success. I believe the fact that financial advisors of color are only slowly starting to catch up to investors of color means an element of trust is missing in the broader wealth journey for Black investors.
Years ago, I was introduced to a Black investor who had been working with a white financial advisor but had not taken any of his advice throughout their relationship. At the request of a colleague, I took a meeting with him to better understand why he was so reluctant to implement the recommended portfolio changes, although part of me already knew the answer. During our first meeting, which occurred virtually during the coronavirus pandemic, he looked closely into the camera with a smile and told me I was the first Black woman advisor he had ever met. This conversation is one I reference often to help illustrate the fact that representation and cultural competency are critical. All advisors must be prepared to serve all clients.
Cultural competency educates advisors to understand that it’s common for investors of color to have their money siloed across many accounts. For instance, they may have a traditional checking and savings account with a retail bank, own a few individual shares that they have bought directly from companies they like, and perhaps employ more than one financial advisor. Often they are missing the one person who can look across the entire landscape to ensure that the investor is not missing opportunities.
This approach can lead to planning gaps, excessive fees, and headaches as the investor becomes the one navigating and directing an entire team. Perhaps in this example, the investor didn’t believe the advisor understood his needs.
My relationship continues with this same gentleman today, but I often think of how his portfolio would have benefited from diversification over the years had he taken the advice of his advisor. How can we prevent this kind of situation? Black investors won’t always want or even need Black advisors, but all advisors must be prepared to serve all clients.
Conducting an Annual Financial Checkup
My advice to individual investors: Treat your financial health like your physical health. Annual visits to the doctor are an important part of ensuring physical health. Black Americans are 30% more likely to die from heart disease than non-Hispanic whites. Preventive care is one of the best things we can do for ourselves and our family.
It’s time to carry that same advice over to our finances. Well before tax season, and still in the spirit of New Year’s resolutions, use the start of the year to clean up your finances.
It’s never too late to make a plan. If you are someone who doesn’t have a good handle on where all your investments are, picking up pen and paper is a great way to start. Itemize not just the numbers but also the locations of your assets. Then, write down some of your wealth-building goals to help you better understand what you are trying to achieve through investing.
A well-rounded plan has investment, estate planning, and tax efficiency built in. If you don’t have all three components, there is likely going to be a gap in your overall planning. To help you build and stick with a well-rounded plan, identify a financial advisor whom you like and trust. Look to their credentials to help fortify your decision-making process, including qualifications like CFP designations.
For investors of color, in particular, there is an added level of responsibility for choosing an advisory team that possesses cultural competence—a team that understands and values your specific cultural values and beliefs, so that when life happens, there is someone meeting you on the same side of the table.
Financial advisors are critical, long-term partners, and the relationship should be both long-term and generational. More than advisors, they are planners.
Once you establish trust with your financial advisor, it’s important to stick to the plan during market uncertainty. The difference between staying on track and not staying on track can often come down to trusting your advisor more than your emotions. That’s why, during times of uncertainty, my clients and I can feel more prepared because we have already thought through what will happen during market downturns or life events.
I remain hopeful that financial institutions will continue to prioritize bringing people of color into leadership roles. My hope for all investors, but particularly those of color, is that you find a long-term financial planner who can help you navigate your wealth journey in a personal and meaningful way.
Kleo Curry is a registered representative of UBS Financial Services Inc. UBS Financial Services Inc. is a subsidiary of UBS Group AG. Member Finra/SIPC.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements. For designation disclosures visit https://www.ubs.com/us/en/designation-disclosures.html
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.