PLANSPONSOR - February/March 2021 - 11

Black
Americans
Form New
Financial
Habits Due
To COVID-19
AFRICAN AMERICANS have been
disproportionately affected by COVID-19-
in both their spending and saving habits,
a new study shows.
While the pandemic produced financial
challenges for many Americans,
Black consumers have felt it more severely
than those of other ethnicities, a study
from Lincoln Financial Group has found.
According to the company's October 2020
Consumer Sentiment Tracker, released
early this February, Black consumers were
the most likely to have experienced job loss
due to the pandemic (32%). They were also
the most concerned about lacking appropriate
emergency savings (42%) and funds
to cover everyday expenses (41%).
On the plus side, the study found, 74%
of Black American workers said they are
planning to make lasting changes to the
way they spend and save, while 75% said
they are thinking differently about how
to plan for their financial future and are
searching for financial planning resources.
Sixty-seven percent said they are reading
and learning about financial markets and
investing, as well as considering whether
they have the right insurance (61%).
To help meet these goals, Black
consumers responded that they would
like financial advice, especially on longterm
finances and retirement. Thirty-nine
percent, more than any other ethnic group,
said they prefer to learn about financial
products by meeting with a financial
professional; 28% would opt to seek advice
from a financial services company.
TIDBITS
No Alternatives
Even plan sponsors that could offer more sophisticated investment options
to participants at institutional pricing often choose not to. This absence
of alternatives is at least partly because, sponsors say, most participants
are novice investors and should not have exposure to more sophisticated
investments that institutional investors often use.
Percentage of plan sponsors using ...
9%
... real estate,
private equity
5%
... real estate,
private debt
4%
... hedge
funds
4%
... private equity
excluding real estate
4%
... liquid
alternatives
Source: PGIM, " The Evolving Defined Contribution Landscape: Alternatives & ESG as LongTerm
Solutions for Long-Term Challenges " (survey conducted by Greenwich Associates)
Eric D. Bailey, founder of Bailey
Wealth Advisors and a registered representative
of Lincoln Financial Group
affiliate Lincoln Financial Advisors Corp.,
says he believes offering tangible education
during the early stages of a career
increases financial literacy.
" Plan sponsors can make a real, positive
impact by supporting their Black
employees, and entire workforce, by
ensuring they are focusing on education-
helping their employees understand and
make the most of the benefits available to
them and providing actionable financial
wellness tools and resources, " Bailey says.
" With this, we have a real opportunity to
address the income discrepancies we saw
among race and ethnic groups in the data. "
The research also underscores a
problem that Black workers faced long
before COVID-19: the racial wealth gap
in the U.S. The 2019 Survey of Consumer
Finances (SCF) found that significant
wealth disparities for families of diverse
racial and ethnic backgrounds had
changed little since 2016-and that the
typical white family had eight times the
wealth of a typical Black family.
Further, Black families were less apt
to have employer-sponsored retirement
accounts than were white families. The
SCF study found that in all age groups,
Black families were far less apt to own a
defined contribution (DC) or individual
retirement account (IRA) than were white.
Among working-age families, white families
were also found to have more widespread
access to employer-sponsored retirement
plans than were Black families.
To acknowledge the existence of the
racial wealth gap and to construct benefit
packages to combat this disparity are
steps employers can take to support Black
employees, says Dennis Wall, vice president
and leader of group education strategy
and development at Goldman Sachs.
" Sponsors can assist by providing
financial wellness group education that is
emotionally intelligent, can spell out the
issues specific to the Black community, and
can inspire people to take tangible, positive
financial actions, " Wall says. Employers
may also consider a group legal benefit,
which could allow Black employees to set
up an estate plan at an affordable rate, he
adds. -Amanda Umpierrez
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