Ariel-Schwab Black Investor Survey unveiled at summit shows lack of progress

(October 13, 2007) Ariel Mutual Funds and The Charles Schwab Corporation last week released their tenth annual Black Investor Survey at the first-ever Ariel-Schwab Black Investor Summit. The two financial services companies convened the summit in New York City at NASDAQ in response to the survey’s findings, which show that African-Americans save far less money than Whites and are no more likely to be investors today than they were a decade ago.

“The truth is that many Americans are not saving enough to ensure a comfortable retirement,” said Schwab Founder, Chief Executive Officer and Chairman Charles R. Schwab. “The problem is broad-based; but the 10th anniversary of this research and today’s summit serve as important reminders that the need to better prepare for their financial futures is even more pressing among this underserved segment of our population.”

According to this year’s just-released Ariel-Schwab Black Investor Survey of 500 Blacks and 500 Whites earning more than $50,000 annually, the median amount of money saved by Blacks surveyed is less than half of their White counterparts ($48,000 versus $100,000). On a monthly basis, median savings is $182 for Blacks versus $261 for Whites.

The survey was first conducted by the two companies in 1998, when 57% of Blacks and 81% of Whites said they owned individual stocks or stock mutual funds. A decade later, still just 57% of Blacks are stock investors, compared to 76% of Whites. During the past ten years, the number of Blacks who own stocks or mutual funds rose as high as 74% (in 2002) only to fall again, while White participation has consistently hovered within a few percentage points of 80%.

“The data is troubling because it suggests that barriers to investing are just as formidable as they were a decade ago. Our industry and our community must address this challenge aggressively,” said Ariel President Mellody Hobson, adding, “Government and employers also play a crucial role.”

Needing more but saving less

This year, Ariel and Schwab also conducted a first-of-its-kind survey of middle and upper income Black and White retirees to assess their investing behavior and how well they prepared for retirement. The survey shows that retired Blacks have median savings of just $73,000 compared to $210,000 for Whites. Blacks, on average, also retired earlier than Whites (59 vs. 61) and are more likely to be relying on a pension or Social Security rather than a defined contribution plan, such as a 401(k) plan. 

In response to the survey’s findings, Charles R. Schwab and Ariel Founder, Chairman and Chief Executive Officer, John W. Rogers, Jr. invited leaders in business, academia, government and the non-profit sector to discuss measures aimed at spurring wealth building and responsible retirement planning among African-Americans. For the conference, Ariel and Schwab published “The Ariel-Schwab Black Paper: A Decade of Research on African-American Wealth Building and Retirement Planning.” Interested parties can visit www.arielmutualfunds.com or www.aboutschwab.com to download a copy of the paper.

John W. Rogers, Jr., commented, “We can no longer afford to simply admire this problem; it calls for action,” said Rogers. “Today we took steps to change the course of our country’s financial future and to close the savings gap that exists between Black and White Americans. My hope is that a decade from now, both Blacks and Whites will be equally well prepared for retirement and that there will be no need for us to continue this survey.” 

The random sample survey of 500 Black and 500 White households earning over $50,000 annually is the tenth for Ariel-Schwab. It was administered by telephone between June 23 and July 14, 2007. The margin of error is approximately 4.5%.

The retiree research conducted this year surveyed 300 Blacks and 300 Whites within the first ten years of their retirement who earned over $50,000 annually before retiring. The survey was administered by telephone between June 22 and July 11, 2007. Both surveys were conducted by Argosy Research.

Ariel Capital Management, LLC and The Charles Schwab Corporation are separate entities, but co-sponsor the “Black Investor Survey.”

Ariel-Schwab Survey Highlights

􀂉 African-American stock market participation is at the same level as it was ten years ago (the first year of the survey): at a low of 57% (compared to a high of 74% in 2002). White investing is at 76% this year.

􀂉 Even when all other significant demographic factors are held constant (age, income, gender, education, and so on), Whites are nearly twice as likely as African-Americans to be investors than Whites.

􀂉 While 56% of Whites say that retirement is their most important goal for saving and investing, only 40% of African-Americans see retirement as their priority. All else being equal (income, age, etc.), Blacks are 50% less likely to say retirement is their primary saving and investing goal.

􀂉 Preference for real estate as an investment is at a five year low, with 45% of Blacks and 34% of Whites saying that it is the “best investment overall.”

􀂉 African-Americans continue to lag their White counterparts in monthly savings: Blacks save an average (median) of $182 a month, while Whites save an average of $261 a month. Of those who are working and who have retirement accounts, Blacks save an average (median) of $173 in those accounts, while Whites save an average of $252.

􀂉 The overall value of savings and investments is an average (median) of $48,000 for Blacks and $100,000 for Whites.

􀂉 Of those who invest, more African-Americans (55%) than Whites (47%) report that they first started investing as a result of having a 401(k) or other employer-sponsored retirement plan.

􀂉 When asked which is a bigger worry: day-to-day expenses, or having enough money to retire, 41% of African-Americans cited expenses, and 59% cited retirement. In contrast, only 29% of Whites cited expenses and 71% cited retirement.

To access the 2007 Black Investor Survey, log onto www.arielmutualfunds.com  or www.aboutschwab.com. 


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