Financial literacy alone will not be enough to close the wealth gap
Sonya Dreizler: Hello, my name is Sonya Dreizler. With me today is Phuong Luong, and we’re here to talk about creating generational wealth for all families.
Phuong Luong: Thanks. Thanks. What a pleasure to talk to you about this important subject. Yes, I am delighted to be here.
dreizler: Well, let’s go. We’ve probably all heard the term racial wealth gap. What does that mean? Where are we ? And how did we get here?
Luong: Yeah. So big questions, but important to cover because not everyone knows what the racial wealth gap means or what it refers to. And actually, to begin with, I’d like to rephrase that term. I don’t really like to use the term racial wealth gap. I would rather say racial wealth divide. And it’s not just something that I created or declared. This is because when we think of gaps, we are thinking of a small distance that we could simply bridge. But in fact, when we say divide, which highlights the real issues. There are real barriers – structural, interpersonal and wealth barriers—that exist between the level of wealth of certain communities in the United States compared to other communities. And when I talk about communities, I’m talking in terms of gender, race, ethnicity, there are definite wealth differences here, not just in terms of numbers, but also in terms of opportunities and blockages that are place for some communities over others to create or lose wealth.
So how did we get here? It’s a long, very long story, from the founding of this country, land theft, slavery, to blocking who can start a business, who can go to school for a fair cost, which is allowed to buy a house in a certain area, and I refer to redlining, for example. We can talk about all of these things, but there are so many resources available online throughout history that so many financial advisors don’t learn in our studies to become financial services professionals. And that’s something that happened to me too. I was actually a teacher in a previous career. And then I worked in non-profit organizations, working with people living in public housing, before becoming a certified financial planner, and in graduate school, my K-12 schooling for my own education before going to school. go to university, even for my CFP studies, I haven’t heard of this financial history, and I think that’s really a shame. I think that’s a huge gap in our knowledge. I believe financial literacy should include financial history. And so, yes, there are so many things that apply from history to the present day.
dreizler: Can I comment on something you said? You mentioned financial literacy, and in our space we’ve seen a very strong push in that direction in recent years. And I wonder if you can comment on how it plays here.
Luong: Absolutely, absolutely. I’m just going to share a little anecdote that often happens to me. When people ask me what I do for a living and I tell them I’m a financial planner, I’m a financial educator. For many people, their access to financial education starts with financial literacy, right? They may have heard this term before or maybe they have attended a workshop in the past. Or maybe they’ve read articles online with financial advice and say—to get in touch with me—they say, “Wow, you know, financial literacy is so important,” and I often hear, “We should be teaching that in schools. We should definitely be teaching financial literacy in schools. And in the past, every time I heard this comment, I was a little annoyed because what I heard at the time, and often people use the term financial literacy to say that poverty wouldn’t exist, that we wouldn’t have these racial or gender wealth divisions, and that people would be more secure and stable if they learned to manage their money better.
dreizler: Right. Like all people who live in poverty…all that stands between them and poverty is someone coming in and teaching a little financial literacy in elementary and high school.
Luong: Exactly exactly. Budgeting, how to use a credit card, how to save. And to be sure, financial literacy is important, especially nowadays, we have to understand how to use these financial products that surround us and benefits and health insurance and so many things that are necessary for a safe and stable environment the life in the United States has now been privatized. So, these products are important in our lives because we need to understand how to use them effectively and how not to take advantage of them when faced with them.
At the same time, I think the term financial literacy and the idea of financial education often blocks discussions of the structural and contextual issues of why people live in poverty and also why people are very wealthy, because those are two sides of the same coin , is not it ? Poverty cannot exist without extreme wealth, and we are seeing this play out even more, not just in the United States—I know we are focusing on the United States today in our discussion—but all over the world. It’s a whole system, and they work together. That’s why I like to remind people that financial literacy has to include financial history, because if you don’t talk about and learn about financial history and read about it and engage in this story—but also the things of today that are still happening and that stem from this story—so we so often blame ourselves, blame individuals for the state they are in rather than looking at the big picture of why there are so many barriers in place for people to get rich and have the financial security.
dreizler: Are there any other tools or strategies, learning resources you would like to add, or if there is anything people could do. They finished watching this video, they are inspired, want to learn how to take the next steps? What do you suggest?
Luong: Two things. One is a book that I recommend whenever anyone is interested in this subject is The color of money by Dr Mehrsa Baradaran. Fantastic book. It’s a survey of history but also the current impacts of that history that we’re talking about around banking and capitalism and how what we’re seeing here today, speaking, really applies to all Americans, and it impacts all of us.
And the second resource I want to share is a guide to transformative investing and how to evaluate it from a group called Resource Generation, which is an amazing advocacy group of young rich people, who redistribute it and reinvest it according to their values. Look for something called Transformative Investing Principles which is on their website and is free to read and available to anyone who wants to read it. I send it to a lot of advisors because it’s a really, really concise, really in-depth look at how advisors can improve their practices if they want to make structural changes to their work.
dreizler: I’m just going to ask another question. How about not specifically learning or advising clients individually, but are there any changes within a practice, e.g. referrals, staff, are there any other changes—means of communication—are there other things advisors should at least have in mind when considering all this new knowledge and trying to integrate it in a way that serves their existing clients and hopefully a wider group of prospects and future customers?
Luong: Yes quite. One thing I would recommend is that companies that offer or seek professional training and continuing education for their employees include topics on financial history and the racial wealth divide. There are so many materials to bring to your business. And then another thing is to really look at your hiring practices, and that goes for any employer, to look at your hiring practices to see if you’re recruiting and finding the best talent for your company? Or do you pay too much attention to things like personal background, things that are coded, level of education, internships they might have done in the past, experiences they might have had in the past, because in my experience, personally as a person of color but also in a hiring position before and where I used to work, so often as a hiring manager, we could look at false competency markers when we We’re looking at really superficial things that we’re not really evaluating the person in front of us. And be prepared to train them because we know that in our field it’s male dominated and it’s white professional dominated, right? The lack of people of color in financial services is an issue we can all tackle in different ways, and hiring and recruiting is one of them.
dreizler: I could talk about this topic all day. You have the subject for another video, maybe. I really appreciate you being here with me today.