6 conversations toward generational wealth in an increasingly diverse America

Last fall, the Treasury Department wrote about the racial wealth gap and said that "racial differences in household wealth are some of the most visible and impactful manifestations of racial inequality in the United States." As a market director who guides financial advisors that serve hundreds of families in the Detroit area, I've seen the impact of some of these inequalities firsthand.

Treasury also stated that "there's a direct correlation between access to higher education, better paying jobs, home ownership, the ability to relocate, take investment risks and business ownership as wealth is generally transferred through family members." This reinforces the importance of creating generational change around finances, especially for underserved populations. Generational wealth opens the door to solutions and strategies, which may not have been previously accessible for families. 

Many underserved communities do not have immediate access to personal finance resources. Therefore, many families aren't having conversations around proven money management strategies. Additionally, the educational system does not make teaching personal finance a priority in most public schools. Everyone plays a role in addressing disparities that hinder the ability of the least advantaged families to make informed decisions that allow them to invest in the current and future generations. 

Financial advisors play a meaningful role in helping close the racial wealth gap in America. They serve as counselors, educators and advisors, helping clients manage their resources for the long-term. While building wealth over time isn't guaranteed, we believe that increasing financial literacy among clients is an important step to helping them create a strategy that enables them — and their loved ones — to pursue their goals, live with more financial security — and ultimately pass their knowledge to their next generation of loved ones. 

Here are six conversations to have with clients to help them build generational wealth. 

1.     Encourage clients to make financial literacy a family value. Creating a budget and developing positive spending habits are some of the biggest financial challenges people face. Families can start with the basics, like setting a manageable budget and building credit, and then approach investments, insurance and other financial topics. This can start at any age. For example, parents can use birthday, allowance or Christmas money to teach young children the basics of saving, spending and giving. Having these conversations early can help families pass down good financial habits for future generations. 

2.     Ground your advice in your clients' values. It's beneficial to have clients focus on the people, principles and values that are most meaningful to them. People should let their values guide where they place their finances and energy, such as spending time with family, helping others in their community or deepening their faith. Connecting to something larger than themselves can help clients use their resources to support the people and causes they care about most. And, these values can be shared among the family and instilled in the next generation.

3.     Reinforce having a financial strategy. It can be tempting for a client to react emotionally to market changes or make impulsive buying decisions. When clients have a financial strategy that's anchored around their priorities, goals, and values, it can help keep them on track. We believe that helping people achieve financial clarity  enables lives full of meaning and gratitude. We believe that money is a tool and not a goal, and we know that rooting a financial strategy in our client's purpose helps them stay committed to their long-term goals. 

4.     Help your clients understand different opportunities. Clients have a lot of choices with their finances, and financial advisors play an important role in helping them consider their next best financial choice. Some clients need to prioritize paying down debt or building up an emergency savings fund, while others are focused on rebalancing an investment portfolio. Others want to invest in the next generation's future by starting a 529 college account. Financial advisors can help clients understand their options so they can make choices guided by their values. 

5.     Explore diversifying income sources. The rise of remote work and the gig economy has opened new opportunities for people. If a client is looking for additional income, there are more opportunities than ever to explore choices that fit their unique lifestyle. Encourage them to put the extra income toward a retirement account, like a 401(k) or an IRA, to help prepare them for the future and leave the legacy they want.   

6.     Demonstrate the importance of a support system. A strong support system can help clients manage their finances and leave an impact on the people and causes they care about most. A support system can include a client's financial advisor, family, church and local community. Unfortunately, not everyone has a strong support system, or the resources to create a financial strategy that helps them leave a positive impact on future generations. At my company, Thrivent, we believe everyone deserves a financial plan. This is why we created Money Canvas, a free program that offers online coaching to help people (clients and non-clients) establish healthy financial habits. Sharing these simple programs with people is a great way to help them build a support system and leave an impact on generations to come.  

Financial advisors are always quick to ask clients what they value most, and their answers almost always start with family. People want to pass along their values and wealth to the next generation. It's easy to look at the racial wealth gap and struggle to know where to start, but I believe these conversations offer practical, tested options for all clients. The process toward financial clarity can be a powerful and inspiring way for clients to connect with their families. More than just a conversation about money, it can teach good financial habits and create generational wealth in an increasingly diverse America.