CEO & Founder of BrightPlan and a former executive at Cisco, is a longtime Silicon Valley innovator and business leader.
This year has been quite a roller coaster ride, from the pandemic to wildfires to hurricanes and social justice protests. Many people are looking to the corporate world for support. In the U.S. where the biggest companies have an outsized influence on how people live, businesses have a unique opportunity to directly address some of the biggest challenges society is facing right now. And they can do it while simultaneously investing in the future of every employee — and improving business outcomes.
In response to an overwhelming surge of requests from employees, thousands of companies have put out statements affirming their commitments to diversity, equity and inclusion (DEI). That’s a good start, but more needs to be done. According to data from ZipRecruiter, more than 86% of job seekers cite workplace diversity as an important factor in their job searches. Although we’ve seen some positive changes (Glassdoor data found a 55% increase in diversity and inclusion job openings from early June to mid-July), there’s much more work to be done.
The Untapped Opportunity
In the past, DEI in the eyes of some corporate leaders was more of a check mark. Today’s DEI efforts have evolved to encompass representation as well as removing bias and discrimination in the workplace. Although these elements are important and a step in the right direction for creating equal wages, they are not sufficient to solve the bigger issue, and a much larger vision is needed. DEI also needs to focus on generating lasting wealth for underrepresented communities. Many companies are overlooking this critical piece of the puzzle: enabling the financial well-being of all employees. By helping underrepresented employees turn wages into long-term wealth, companies can play a pivotal role in fueling financial success that transforms generations. This is the key to sustainable, long-term equality and leveling the playing field.
There’s a wealth gap in this country, and it’s a subject that is not talked about often enough in open circles. But the facts are staggering. The Federal Reserve reports that on average white families have accrued eight times the wealth of Black families and five times the wealth of Hispanic families. While we have seen some promising signs — from 2016-2019, Black and Hispanic families saw their wealth grow 33% and 65%, respectively — the discrepancy remains large. This is a systemic issue — and an opportunity for employers to step up by enabling people of color to achieve their personal financial goals and increase their wealth. Financial success can come in many forms, from paying off debt to saving for retirement to buying a home, but ultimately the goal is to cater to individual needs and build wealth.
Over the years, having partnered with enterprises to help improve financial outcomes for their employees, I’ve identified three key areas to focus on: financial education, financial planning and the investing gap.
It all starts with financial education — and there’s not nearly enough of it in this country, especially for students in low-income families. A study from Next Gen Personal Finance found that only 3.9% of students from low-income schools were required to take a personal finance class, compared to nearly 17% nationwide. What these students aren’t learning in school or through habits passed down from family members, employers can provide through financial wellness programs at work.
This lack of financial education makes it difficult for people to plan for their financial futures. The divide can also be seen in that 58% of Black and Latino households don’t have enough savings to cover three months of expenses at the federal poverty rate, compared to 37% of all households. After education, employers can enable employees to examine their own financial situation by providing them with tools and access to advisers who can help them chart the right course to meet their goals.
A lack of financial education and planning directly feeds the investing gap. Just 36% of Black Americans have money in the stock market, compared with 60% of white Americans. Moreover, women are 10% less likely than men to be investing for their goals, such as retirement. By providing access to people of color and women, companies can help bridge this divide and fuel long-term wealth creation.
Reimagining The Employer’s Role
Our lives and wealth are increasingly tied to our work. Companies have an opportunity to take the lead on money talk and education. It’s about reimagining the role of the employer beyond “here’s a job” and more of a partner to build careers and lives with. Companies so often expect that commitment from employees; this is now their chance to demonstrate their own investment in their employees’ financial well-being. Moreover, employees increasingly expect it — and companies that step up have a competitive edge in attracting and retaining top talent.
Some steps employers can take now include:
• Ensuring fair pay for all employee groups.
• Providing employees with digestible financial education and content to help them learn and make better financial decisions.
• Going beyond the 401(k) by offering more personalized options for employees to reach life goals and appropriately guiding them.
• Focusing on making financial wellness an essential element of an overall benefits package, similar to health care.
• Offering financial wellness tools to employees and making sure those are sourced from companies that adhere to the fiduciary standard and are required to act in employees’ best interests.
Covid-19 has created a new normal, especially in how we view our finances and what matters most to our employees. Now is the time for employers to support their employees with benefits that actually matter, especially those related to employee financial wellness. Employers can play a key role in ensuring all employees have the same opportunities when it comes to financial success and being in control of their life goals and futures. By democratizing financial wellness, companies can make great strides in creating a more diverse and inclusive future.