Financial illiteracy in the U.S. hits women and women of color especially hard, according to several participants in an InvestmentNews workshop on the role financial literacy can play in making the advice industry more diverse and inclusive. The half-day think tank was held directly before this year's Women to Watch awards luncheon.
As reported in a recent InvestmentNews' investigation, only 57% of American adults are financially literate, ranking the U.S.14th among all nations despite having the world's largest economy. The U.S. is only slightly more financially literate than the population of Botswana, which has an economy that is 1,127% smaller.
The issue is even worse among women and women of color, explained Chloe McKenzie, founder and CEO of BlackFem and On A Wealth Kick.
"Wealth inequality is real, it's crippling and it's distributed heavily along racial and gender lines," Ms. McKenzie told the think tank. "Girls and women of color need the most help."
Improving financial literacy can not only help close the wealth gap, it can introduce financial advice as both a resource and career path to young women. But how can advisers help?
Ms. McKenzie said financial literacy programs need to begin by considering which communities they are trying to reach, and how to make the information relevant to them. To make the biggest impact, she suggested programs introduce financial concepts to young children so that they grow up with a basic understanding of finance and can help teach other family members.
"With younger kids, vocabulary acquisition is probably the best cognitive way to engage them," Ms. McKenzie said.
Other participants agreed that firms of all sizes should consider how they can each make an impact in their communities. For example, larger firms can fund programs, while small firms can work at the community level to urge financial education in schools.
Michelle Taylor, an adviser with Luma Wealth, mentioned how her firm is considering a program to support girls interested in financial planning.
"We are looking at partnering with a girl's school where we can take a high school girl all the way up through college and into an internship," Ms. Taylor said.
The program would provide mentorship, exposure to the industry and a chance to work with other women advisers.
Advisers also need training, perhaps through a digital portal with resources and materials such as BlackFem's lesson plans. One group suggested including training for firms looking to expand their reach into minority communities, and Rianka Dorsainvil, founder and president of Your Greatest Contribution, said this underscores why diversity hiring is so important to the mission.
"A common theme I hear among advisers is, 'we want to help, but we don't know how or we don't want to say the wrong thing,'" Ms. Dorsainvil said. "The key is to have different representation. That is the importance of hiring diverse candidates."