In the last 15 years writing Ask Carrie columns, I’ve often written about why and how investing opens the door to financial freedom. In my mind, the advice—and the opportunity—should be available to everyone. Unfortunately, for too many Black Americans that’s not the case. As a country, we’ve started to have some important conversations that are long overdue. Racial inequality and the resulting wealth gap are not only disastrous for the impacted individuals, but also weaken our communities and our economy. To begin to address these issues, I’d like to share some insights from the 2020 Black Investor Survey that Schwab conducted in collaboration with Ariel Investments, the oldest minority-owned investment firm established in the United States. This long-running survey looked at stock market participation as well as the characteristics and attitudes of middle-class Black and white investors. But despite having similar income levels, the survey revealed some stark disparities—as well as some encouraging trends. Historic low participation in the stock market persists among Black Americans… which exacerbates wealth inequality First, we need to appreciate that far fewer Black than white Americans invest in the stock market. This has historically been the case, but the 2020 Ariel-Schwab Survey showed the largest gap in the study’s 20-year history (55 percent of Black versus 71 percent of white Americans). The reasons for this are complex and include decades of systematic discrimination, less money available to save and invest, and lack of trust. But the impact is crystal clear: without the power of the stock market on one’s side, the wealth gap continues to widen. As the stock market hits record highs, those who don’t invest are left further behind. To provide context, despite the major stock market collapse of 2000, the Great Recession in 2008, and the pandemic declines in 2020, $1 invested in the S&P 500 in 2000 would be worth almost four times that amount today. In contrast, a dollar placed in savings would have lost value when compared to inflation. And while you don’t need a lot of money to start investing, you do need time to build assets that can compound into significant wealth. The financial services industry needs a bigger and better welcome mat One of the most troubling and telling statistics in our survey is that the majority of Black investors (65 percent) as opposed to white investors (38 percent) don’t feel respected by financial institutions and so don’t trust them. Black investors who work with a financial advisor express greater trust, but this is a clear call to action for every bank, brokerage house, and insurance company—including Schwab. Without the foundation of respect, we can’t expect anyone to entrust us with their hard-earned dollars. My friend Michelle Singletary put a very human face on this issue in her column “A Legacy of Slavery Made My Grandmother Fear Investing.” Generations of oppression and discriminatory policies legitimately overshadowed every financial decision Michelle’s grandmother made. Michelle writes “As a descendent of slaves who were denied the right to own anything of real value” the only investment that her grandmother trusted was her home. Her experience taught her that she needed to “see and touch her wealth”. For this smart and determined woman, stocks and other financial instruments were simply out of the question. To me, the message is clear: it’s up to those of us who work in finance to earn the respect and trust of Black investors, not the other way around. Schwab was founded on the principle of democratizing investing. Now, as an industry, we need to examine every aspect of the way we do business to unequivocally expand our outreach to underrepresented individuals and communities of color. We must do better to level the playing field for all Americans. Signs of hope: Young Black investors are closing the gap On the positive side, the tide seems to be turning for younger Black Americans. In our survey, 63 percent of Black investors under age 40 were participating in the stock market, a number equivalent to their white counterparts. In fact, in this younger age group, three times as many Black investors as white investors invested in the stock market for the first time in 2020. The importance of financial literacy and dinner table conversations Another necessary step to eliminating the wealth and investing gap lies in financial literacy—whether that takes place in the home, in schools, or in the workplace. Investing isn’t intuitive. It’s a learned skill that requires knowledge, practice and discipline. A bright spot in our survey is that dinner table conversations about money and investing are on the upswing, especially among young Black investors. As Mellody Hobson, Co-CEO and President of Ariel Investments, points out: “Not only are Black Americans beginning to walk the walk, we are also beginning to talk the talk. In fact, Black Americans are much more likely to discuss the stock market with their families than in years past.” Another interesting trend is a new sense of optimism among Black investors. When asked to predict their financial condition in 2021 compared to 2020, 60 percent of Black investors felt that their situation would improve; only 40 percent of white investors echoed this sentiment. Building a brighter future for all As America begins to recover from the ravages of 2020, we have the opportunity to build a more equitable society for all Americans—on many levels. And while the pandemic, access to health care, policing practices, and unemployment have been in the majority of the headlines, we need to pay attention to the ways in which inequality is exacerbated by distrust and lack of participation in the financial markets. As someone who has spent her entire career advocating for financial literacy and underrepresented communities, I vow to do my part in welcoming and helping all Americans build wealth, increase their confidence, and create better lives through planning, saving and investing. Have a personal finance question? Email us ataskcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries,contact Schwab. Disclosures: The Charles Schwab Foundation is a 501(c)(3) nonprofit, private foundation that is not part of Charles Schwab & Co., Inc., or its parent company, The Charles Schwab Corporation. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers are obtained from what are considered reliable sources. However, their accuracy, completeness or reliability cannot be guaranteed. COPYRIGHT 2020 CHARLES SCHWAB & CO., INC. MEMBER SIPC. (#0321-117E)

Ask Carrie  New Ariel Schwab Black Investor Survey Is a Call to Action - 61