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‘More black Americans became first-time investors in 2020 than any other year’: Schwab Foundation

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Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation, joins Yahoo Finance’s Alexis Christoforous to break down the new Ariel-Schwab black investor survey.

Video Transcript

ALEXIS CHRISTOFOROUS: 2020 was a banner year for the stock market. The S&P rose 16%, the NASDAQ surged 43%. But a new survey finds a large portion of Black Americans are missing out on those gains. Joining me now as part of our America Saves Week is Carrie Schwab-Pomerantz, President of the Schwab Foundation. Carrie, always good to see you. So this survey, I know, is in partnership with Ariel Investments. And it found only 55% of Black Americans said they owned stocks last year. That's compared with 71% of white Americans. Why is there such a gap?

CARRIE SCHWAB-POMERANTZ: Yeah, unfortunately Alexis, by the way, great to see you as always, but unfortunately, you look at history, and what Black Americans have faced structurally. There's also social and cultural differences in terms of what they talk about in the family, which all adds up. But the great news is that more Black Americans became first-time investors in 2020 than any other year. And it's mostly being driven by the under 40 crowd.

And now, you see is that there's an equal number, almost equal number, of younger Black investors against their white counterparts under 40 years old. So that is the beginning of closing the gap, which is great that they're all first-time investors. But we just want to make sure that everybody has the tools and the knowledge to be lifelong investors.

ALEXIS CHRISTOFOROUS: Absolutely. And I think part of the reason why you saw more young Blacks start to invest and get into the market versus their white counterparts is Black families are talking about investing more. I mean, this is a conversation sort of at the virtual table, if you will, within Black families and communities.

CARRIE SCHWAB-POMERANTZ: Yes. That was hugely optimistic. And I don't know, Alexis, if you remember, my dad and I wrote a book called, "It Pays to Talk." It was all about having family conversations, and that financial security begins with a conversation at home. And like you said, Black Americans are talking more today about all aspects of money-- debt, paying for college, and the stock market. And that's the beginning of financial security, because it demystifies the language of money. And that's the beginning of financial security.

ALEXIS CHRISTOFOROUS: Now I also saw in this survey that participation in retirement plans was pretty even between Blacks and whites. But this was a little disturbing. More than twice as many Black investors-- 12%-- compared with 5% of white investors, said the pandemic had led them to borrow against their 401(k)s. What do you glean from that?

CARRIE SCHWAB-POMERANTZ: Well, definitely Black Americans have been more affected by the pandemic than their white counterparts. And we've been reading that all along, just different jobs, maybe not as financially set with emergency fund and so forth. So it's really important that we go back to giving them the tools to ride through these storms. And I always share with people that starting with a plan is really important-- a financial plan, which is like a life plan. And it's never too late to start one or to have one, no matter what your financial situation is.

Because once you get a hold of what you have, you're much more informed to set yourself up for the future. And what we've seen is through studies that those people who do plan save on average 300% more than those who do not. So it's just really about putting pencil or a pen to paper, knowing where you are, where you want to go, how to get there.

ALEXIS CHRISTOFOROUS: And I think it's so important that you stress, it's never too late to start. Because I think people feel like there's some magic number. Oh, I passed my window of opportunity. But you're right-- never, never too late. And also, I found this to be pretty disturbing, 35% of Black investors feel they are treated with respect. Do they mean when they are dealing with financial advisors and such? That they don't feel like they're being respected?

CARRIE SCHWAB-POMERANTZ: That's what we suspect, that that means the others do not feel respected, which is really, really discouraging and something that we all, in particular in our industry, have to take note, and make sure that we change our ways if that's the case. Because, again, that gets in the way of Black Americans wanting to participate in the markets and utilize traditional financial services to benefit and to have the same success and financial security that anybody deserves.

So I know at Schwab, we're trying to change the face of Schwab and our industry. Our study also showed that Black investors want to work with a firm that has some level of racial diversity. And so that's also a good start as well for our industry.

ALEXIS CHRISTOFOROUS: Well, lots of great insights here in the survey between Schwab and Ariel Investments. Carrie Schwab of the Schwab Foundation, thanks so much.