Lauryn Williams, CFP® on How to Shrink the Racial Wealth Gap (Episode 80)

Communities of color are facing racial injustice. I’m not an expert in racial disparities, but I know student loans and I understand finance. One issue facing black communities is the racial wealth gap, and I talked with Lauryn Williams, CFP®, about the impact it has.

You might not know that fewer than 1% of Americans who hold CFP® credentials are African American women. Williams is one of them.

Williams is an outstanding student loan planner, and I’m honored to have her on our team. She’s also a 4x Olympian medalist and owner of Worth Winning, a financial planning business that helps people reach their dreams.

Who is Lauryn Williams?

Williams grew up in Detroit and Pennsylvania with five sisters and two brothers. “There was not a lot of money to go around because there were a lot of people that needed to be fed and sheltered,” she said.

Education was very important in her family, and she studied finance at the University of Miami on a track scholarship.

After she graduated, she hired a financial advisor to help her balance the responsibilities of being an adult while being a professional athlete, and was disappointed in the service she got.

Deciding to be part of the solution, Williams opened her financial planning firm, Worth Winning, four years ago. Her focus is on young professionals in their 20s and 30s. She structures her services specifically to reach people of color.

Becoming aware of race and gender

Williams knows that there are racial injustices that separate the majority versus the minorities in America. “But I didn’t experience racism and didn’t know or understand the things that were happening to me specifically because of class and race,” she said.

It wasn’t until she joined the financial industry that she felt uncomfortable because of her race.

“When I joined the financial industry, I was frequently in a room where there were 400 white people and maybe four people of color,” said Williams.

People would walk up to her and make comments that made her feel like a rare exhibit. She said people would say things like, “Wow, look at you; how did you get here?”

“I felt like I was being interrogated a lot of times rather than being invited into the community,” said Williams.

What is the racial wealth gap in America?

People of color are far behind white America in wealth. For example, a Brookings Institution study shows the average wealth for a white family is $900,000, but it is only $140,000 for a black family.

If you look at it from a net worth perspective, an average white family has a net worth of $170,000 versus $17,000 for a black family.

“The problem with the racial wealth divide is not even so much that there’s a gap, but that we’re heading in the wrong direction,” said Williams.

One big reason the racial wealth divide is growing bigger is that black people are starting the race from far behind.

Williams is an Olympian and thinks of things in terms of running. “If I give you a 100-meter headstart in a 200-meter race,” said Williams, “it’s highly likely that you’re still going to get to the finish line before me.”

Black families don’t have as much opportunity to save, and must often borrow for education and struggle to save for retirement.

Black people also are behind in homeownership compared to white people, which means they don’t have lands to create wealth.

“There’s not a place to pass down; there’s no inheritance,” said Williams.

Access to credit for people of color

If you look at ways poor Americans, who are disproportionately people of color, access credit, two common methods are:

• Payday loan stores
• Pawn shops

Different types of credit have different interest rates. For instance, the typical interest rate for a payday loan is 400%. Pawn shops aren’t much better at 100% interest.

I’ve never had to use a payday lender or pawn shop for a financial emergency, but seeing how much consumers are paying for those products blew me away.

I asked Williams why the racial wealth gap isn’t closing faster, and she named payday lenders specifically.

“Payday lenders are still a thing and they’re on every corner in communities of color,” she said. “You have more payday lenders than you have grocery stores.”

And it creates a perpetual imbalance that prevents people from getting ahead because they’re paying 400% in interest.

How student loans disproportionately impact African Americans

When it comes to student loan borrowing, “87% of black families borrow to send their kids to a four-year college compared to 60% of white families,” said Williams.

There’s also a significant gap in default rates between borrowers of ethnic backgrounds:

• 20% to 30% of African American borrowers default
• 5% to 10% of white borrowers default

Increased defaulting of black borrowers could be partially due to them being less likely to finish their college education.

Many people in the black community don’t receive the right support before going to college, making completing their degree much more challenging.

“Generally, you get to school, and you either can’t finish for financial aid reasons, or you realize this is not the right fit for you,” said Williams.

Making the financial industry more welcoming to people of color

The “how” is the biggest piece in all of this, and there are no easy solutions.

“I would say to financial professionals,” said Williams, “it is about becoming part of the conversation.”

Now, more than ever, we need people to understand that silence is unacceptable. I mentioned that I’m an average white guy and not an expert on racism or the racial wealth gap.

Williams wants everyone to talk about the problem to bring about solutions. “By simply having this conversation, you are doing something to close the racial wealth gap,” she said.

“You are doing something to say, hey, I stand with people of color because this is a conversation important to have even if we don’t have the solutions.”

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