Updated: May 3, 2013 12:14PM
I've always believed that the color of money is green -- and that a share of stock has no idea whether it is owned by a man or woman, or a person of any race or nationality. It's easy to be color-blind when it comes to money.
But John Rogers and Mellody Hobson of Ariel Capital Management tell me that viewpoint ignores some very real differences in the investing habits of African Americans -- differences that could have a huge impact on our society in the future.
As U.S. financial markets acknowledge the Rev. Martin Luther King Jr. today, it's appropriate to examine the issue of race and investing. These two successful African-American money managers and thought leaders participated in the Rev. Jesse Jackson's 10th annual Rainbow Push Wall Street Project conference last week, a gathering of powerful leaders of all races designed to raise the profile of that issue in our nation's financial center.
By day, John Rogers is CEO and lead portfolio manager of Ariel Capital Management, which includes the Ariel Mutual Funds -- more than $16 billion worth of investments. He's a member of major corporate boards, and is a respected civic leader. But his passion is in advocating that the African-American community become educated about the importance of investing.
His firm sponsors the Ariel Community Academy, a partnership with an inner-city public school that teaches kids about money, and rewards good educational performance with investments in a 529 college savings plan.
Mellody Hobson is president of Ariel, a widely known ABC television financial commentator and co-creator of the annual Black Investor Survey by Ariel Capital Management and Charles Schwab & Co., which is in its 10th year. She serves on the boards of Starbucks, Estee Lauder and Dreamworks -- but still takes time to teach an annual investing class for parents of kids at the school.
Says Rogers, "The core issue is that African Americans are not as comfortable investing in the stock market as white Americans." And he has the statistics to back that up. The June 2006 survey of saving and investing among "Higher Income African Americans and White Americans" shows that:
**African Americans have less money saved in retirement accounts than whites: The median amount saved is $59,000 for blacks versus $93,000 for whites.
**African Americans contribute less to their retirement accounts monthly: The median monthly contribution is $254 compared with $306.
**The median amount saved by blacks who have retirement savings outside of retirement accounts is $36,000 compared with $75,000 for Whites.
Rogers assesses the situation calmly, noting that the African-American community doesn't have a tradition of investing. He points out that many of today's African-American retirees worked for government, the Postal Service, as teachers or in large companies such as Ford -- all places where they received traditional pensions. There was little discussion at home about investing in stocks as real estate and insurance became more likely investments for African Americans. And, Rogers says, few of his generation received inheritances, which create the need for stock market investment knowledge.
That lack of knowledge will be critical, though, for the next generation of Americans whose retirement will depend on "defined contribution" plans such as 401(k) plans for corporate workers, or 403(b) or 457 plans for non-profit and government employees. Their retirement lifestyles will be dictated by the amount of their contributions and their ability to make wise investment choices.
And all of that takes education.
So Ariel and PUSH are encouraging corporate America's HR departments and Wall Street's financial firms to direct educational programs to minority employees.
Rogers adds, "Direct contribution plans are the gateway for investment knowledge. The study shows that African Americans who participate in employer-sponsored plans are twice as likely to be investing outside that plan on their own."
The bear market of 2001 didn't help the cause of teaching about investments. "It was double bad for our community," Rogers says. "Because we're new [to stock market investing], we're not as comfortable, so we're going to be naturally skittish. When you're uncomfortable, it's natural to be ruled by emotion."
Rogers is a famed proponent of long-term, value investing.
There is good news in this year's Ariel/Schwab survey: A higher percentage of African Americans express interest in doing and learning more about saving and investing in the stock market.
"I take that as a great positive," he says. "It shows we're investing at lower levels, but that we are really interested in catching up, and we're eager and hungry for information."
Mellody Hobson helped create the survey and is its greatest proponent.
"The survey was born out of frustration," she says. "We approached the financial services industry, and pointed out there were no ads in minority magazines for mutual funds 10 years ago. And no one cared. So we decided to do the survey to get hard data, and to create a wake-up call not only to minority communities, but also to white communities. To the extent that we haven't saved and invested properly, we'll retire into poverty and become a burden to society.
"For us, this is evangelism. We feel we can move the needle of society in a way that's profound, so members of our community can retire comfortably and pass on wealth to the next generation."
I asked Rogers if he could presume to suggest what Rev. King would think of this push for stock market education for African Americans.
His response came easily: "I know from talking to Rev. Jackson about Dr. King, and reading a lot about him, that he was more involved in making sure that African Americans would be part of the economic mainstream. A big part of his dream was economic empowerment, and I think this is all a part of that."
Now there's an all-time truth!
Terry Savage is a registered investment adviser. Check out Terry's answers to reader questions at suntimes.com, and click on Business.