Affluent Black Investor Trends

Phoenix Marketing, a marketing research company that focuses on U.S. affluent markets, released a study of African-American investor behaviors and attitudes. Over 900 Black investors ($25K-$100K+ investable assets) were surveyed via the internet between August 2004 - June 2005. A few of their most notable findings:

70% of affluent African American investors participate in an employer-sponsored 401(k) or 403(b) plan compared to 56.3% of General Population Active Investors.

64% of affluent African American investors own stocks outside employer-sponsored plans compared to 44% of General Population Active Investors.

61% of affluent African American investors own mutual funds outside employer sponsored plans compared to 38% of the General Population.

58% of affluent African Americans have a trading/brokerage account compared to 31% of the general population.

The first two statistics are of particular interest to me because they compare the investing habits of Blacks to the General Population of Active Inestors. What do these figures reveal, what questions do they raise?

Significantly more Affluent Black Investors (ABI) utilize employer-sponsored plans than the General Population of Active Investors (GPAI). I wonder what percentage of the GPAI has access to employee sponsored plans compared to ABI? The 401(k) is available to most corporate wage earners and the 403(b) is for employees of educational institutions and some non-profits as determined by 501(c)(3) codes. Is it possible that having access to these types of retirement/investment vehicles is almost a predictor of affluent black investment? Is it not only possible but probable that most affluent black investors are not self-employed? Hmm..

Holding Affluence/Income constant, I would hypothesize there are two main differences between Black Investors and Black Non-Investors. Information and Convenience. The presence of a 401(k)/403(b) opportunity offers both. ERISA laws require that participants receive information designed to assist them in making investment and retirement-related decisions appropriate to their
particular situations. There is no investment opportunity more convenient than the 401(k)/403(b) opportunity. It's an automatic pre-tax deduction. The money is gone before your paycheck hits your account. You hardly miss it and it lowers your taxable income.

The second statistic, 64% own stocks and 61% own mutual funds outside employer-sponsored plans. This is interesting considered in tandem with the first statistic. If 70% participate in 401(k)/403(b) plans and roughly 60% have investments outside of employer-sponsored plans, it's a logical conclusion that a significant portion of the ABI population has at least two investment portfolios. This should make most investment firms take notice.

I am especially curious as to how many affluent blacks are actually investors compared to the general affluent population.

Phoenix has also released 2005 estimates of affluent households. There are 23.6M Affluent households ($250K investable assets/income of $150K), up 19% from 2004. The number of Mass Affluent households ($250K-$1M investable assets) jumped by 30% from 12.5M to 16.1M in 2005. However, the number of households with $1M+ investable assets only grew by 7%