Black investors prefer Black advisers. What happened to being 'color-blind'?

Black investors prefer to work with Black advisers.

Is that OK?

Aren’t we all supposed to be looking past race, past observed identity, and holding ourselves accountable to connect with the whole person? That’s the point of diversity programs that urge us to be self-aware and act accordingly, right?

So what are we to make of the findings of the latest Ariel-Schwab Black Investor Survey, which quantifies a strong preference by Black investors to work with advisers who mirror their identities?

The question is more nuanced than it initially appears.

So is the answer.

“The data make it look like it’s skin color, but it’s way deeper than that,” said Kelly Johnson. He's a fixed-income portfolio manager at Charles Schwab Corp., Black, and one of the internal advisers for the study, which was released in April.

[More: Black Americans more engaged with investing, especially outside the mainstream]

The study found that 64% of Black investors prefer to work with a financial adviser of the same race, compared to 47% of white investors; 59% of Black investors prefer to work with an adviser who is of the same age or generation, compared to 43% of white investors; and 53% of Black investors prefer to work with an investor of the same gender, compared to 40% of white investors.

It's a startling set of findings, especially given today’s fraught political, social and cultural environment.

The story behind the statistics is more important than the actual numbers, Johnson said.

When Black investors seek out those who share their race, age, or gender, they’re putting their money where their values are.

“This idea that you can just invest on the basis of the bottom line — a lot of people don’t agree with that,” Johnson said. “Within the dominant culture in our country right now, money trumps everything. A lot of minority cultures don’t view things that way. They put family, religious and other values above money.”

In other words, what can’t be contained to the spreadsheet trumps what is on the spreadsheet.  

Adjacent sections of the study build out the context: 44% of Black investors want to align their personal beliefs with their investments, compared to 29% of white investors. That margin holds for environmental, social and governance factors individually, too.

As a whole, the study should lay to rest any lingering claim that being “color-blind” is the end goal for racial equity and inclusion. In fact, attempts to adopt a color-blind stance are actually counterproductive, according to academic research, because asserting that you literally don’t see the skin color of the person in front of you is ridiculous. Instead of sounding righteous, people who say they are color-blind look as if they're out of touch with reality.

St. Charles, Illinois-based adviser Jodi Manthei was chatting outside with a Black neighbor and thought she was signaling solidarity when she told him that she was raising her children to “not see the color piece.”

“No, we want people to see who we are,” he told her. Don’t discount color as an important element of identity and as a powerful factor in life experience, he said.  

That insight changed how she, a white woman, opened conversations with potential clients, especially those who are racial minorities. “How do you build trust if your adviser doesn’t have a complete understanding of where you are and where you’re coming from?” Manthei asked.

That’s the ultimate point of this set of findings from the study, Johnson said. It’s about empathizing with the journey a Black investor took to get to the point where they could even consider working with an adviser.

“It’s layers deeper than skin color. If you’re first-generation, you want to know that they won’t look down on how you earned your money,” he said. “Basically, there is insecurity among some Black people about seeking advice, whether it’s about going to a physician or financial advice. If I go into a financial advisory firm and they don’t have anybody who looks like me, there are a couple of signals I get. One is that they don’t care. The other is that it’s intentional.”

And the presence of Black employees — especially Black professionals — sends the message that the firm, itself, understands and might even support the values held by many Black investors, he added.

“If you see a Black person who’s successful as a financial adviser, in a profession that takes a lot of qualifications, you know they’re good,” Johnson said, “and that allows you to support your own issue set.”