Wealth patterns among the top 5% of African-Americans.
The top 5% of African-Americans invest a greater proportion of their wealth in lower- volatility assets relative to a white comparison group, including insurance, savings bonds and CDs, according to Credit Suisse‘s latest study “Wealth patterns among the top 5% of African- Americans.” The study also shows proportionally higher investments in real estate, and proportionally lower investments in business assets.
“There has been considerable research on wealth creation in America through the lens of race and class. This report, which focuses on the top 5% of African-Americans by net worth, and which does so with more comprehensiveness than many preceding studies, addresses a number of key questions: What are the key drivers of wealth creation among this group? What makes the investment choices of this group distinctive? What brings about these distinctions?” says Pamela Thomas-Graham, Chief Marketing and Talent Officer, Credit Suisse AG.
“This study identifies distinctive investing behaviors within the African-American community and a number of potential drivers of these behaviors,” added Credit Suisse’s Chief Marketing and Talent Officer and Head of New Markets. “The findings may also reflect what we know from adjacent data, which is that African-Americans are generally under-served by banking institutions. The Commerce Department, for example, has published data showing that minority business owners receive loans less frequently, at significantly smaller sizes, and at worse rates than non-minority business owners.”
The top 5% of African-Americans take a relatively conservative approach to decision-making on matters of wealth creation and wealth management. For example:
- The investment portfolios of the top 5% of African-Americans are three times more heavily weighted towards CDs, savings bonds and insurance than the investment portfolios of the study’s white comparison group, and are nearly one-half less weighted towards stocks, bonds and mutual funds.
- The top 5% of African-Americans invest 9% of their non-financial assets in business assets, defined as the total value of business(es) in which a household has either an active or non-active interest. The study’s white comparison group invests 37% of their non-financial assets in business assets.
- The top 5% of African-Americans invest 41% of non-financial assets in real estate outside their primary home, relative to 22% for the study’s white comparison group.
- “Wealth mobility” – the degree to which a population maintains wealth over time or moves into wealth over time – is relatively low among African-Americans and may be a driver of more conservative financial decision-making. IASP’s research shows that around 57% of high-income African-American families in 1984 were still in the top segment of income in 2009, but 8% had fallen into the low-income segment. For high-income white American families, 73% remained in the high income segment and only 1% fell into the low income segment. This analysis is a new analysis of the 1984-2009 data.
- Education is a key driver of wealth among the top 5% of African-Americans. Almost 69% of African-Americans at the 95th percentile of net worth have a college degree, compared with 64% for the study’s white comparison group.