Black investors have long been underrepresented in the stock market; only 33.5% of Black American households owned stocks in 2019, according to Federal Reserve data. But that’s beginning to change. Across the country, a new generation of young Black wealth managers are launching firms that aim to make investing accessible within the Black community – and in the process, to help close the racial wealth gap across generations.
“We all need education, access, and tools to be successful, and those were things that weren’t always accessible to us,” says Calvin Williams, founder of Freeman Capital. The Charlotte, North Carolina firm is the only Black-owned automated investment platform currently registered by the SEC.
Named by Investment News as one of “40 Under 40” industry leaders to watch in 2021, Williams launched his firm with Black investors specifically in mind. He hopes to push back against a legacy of “systemic and institutional barriers that made investing inaccessible and uncomfortable” for Black Americans.
The tides are turning for the better, a shift that’s especially visible among Williams’ fellow Black millennial investors. The 2020 Ariel-Schwab Black Investor Survey, released earlier this year, found “evidence of growing engagement” in stock investment by Black Americans under 40. In fact, 63% of Black respondents in this age group reported holding investments, a rate equal to that of their white counterparts. 29% of these young, Black investors said they started investing in 2020, compared with just 16% of their white respondents.
Williams attributes the boost in stock market participation to both the social justice resurgence of last year and the circumstances of the pandemic. As a byproduct of the lockdowns and social distancing mandates from Covid, people spent less time and money on recreational pursuits. Suddenly, younger adults in particular found themselves with extra resources to invest, along with the time to consider their options.
Lowered barriers to entry haven’t hurt, either. Williams’ clients pay a month-to-month subscription fee that is significantly lower than the average $4,000 annual retainer for an account with a traditional firm. He says that this kind of flexibility is critical for increasing diversity among investors.
“While building my own wealth, I learned that if you did not bring wealth to the wealth management industry, they [often did] not want to serve you,” Williams says. “There was no firm set up with our specific needs” – the needs of Black investors – “and goals in mind.”
Most firms, in other words, are ill equipped to meet the needs of Black clients. “If you’re going …….