The Color of Money

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On a crisp night last October, more than 100 black small-business owners gathered at the DuSable Museum of African-American History on Chicago's South Side. They hadn't come to browse a new exhibit. They were there to talk about money-their money. Kelvin Boston, publisher of Moneywise magazine and author of Smart Money Moves for African Americans, opened up the discussion, which was sponsored by Merrill Lynch, by asking how many millionaires were in the crowd. Six people raised their hands. Murmurs of "good" and "all right" echoed throughout the auditorium. "It was a pleasant surprise," Boston recalls. "These people had some assets."

Forget the phrase "emerging black middle class." This group has arrived. Since 1990, buying power among African Americans has surged 66 percent, to nearly $500 billion in 1998. And while whites may still lead in savings and investment, African Americans are catching up. Today, half of all black households with annual incomes of $50,000 or more have brokerage or mutual fund accounts, according to a survey by Ariel Mutual Funds and Charles Schwab. While historical numbers are unavailable, investment bankers say that percentage represents a huge growth since the mid-1980s. In a symbolic turn to underscore the economic strength of African Americans, last month the Reverend Jesse Jackson celebrated Martin Luther King, Jr.'s birthday on the floor of the New York Stock Exchange, accompanied by government and corporate leaders. The message to Wall Street? Black America means business. "It was a chance for Wall Street to say, 'Yes, we've ignored you for years,'" says Ken Smikle, president of Target Market News, a Chicago-based research firm that monitors black consumers, "'but we'll do whatever's necessary to gain your patronage.'"

Merrill Lynch believes it knows what's necessary. In an effort to understand how better to serve ethnic markets, the financial services firm conducted a series of surveys and focus groups within major multicultural segments in 1997. Two clear priorities emerged from the African Americans polled: the need for more community involvement from companies that do business with them and for more education about financial services. The research affirmed one of the findings of the Ariel/Schwab study: 77 percent of black respondents believe they know just "some" or "very few" of the things necessary to make good investment decisions, compared to only 46 percent of whites.

Working with marketing consultant Stedman Graham & Partners, a unit of the advertising agency True North Communications, Merrill Lynch developed a series of financial-education programs for affluent blacks in Chicago. The project marked Merrill Lynch's first corporate effort to target African Americans, says Wendell Collins, vice president and publicity manager for Merrill Lynch Private Client Group. Previously, the task had been left to the firm's consultants, many of whom conduct their own workshops for black investors in local markets.

The participation of Chicago-based Stedman Graham, an African American majority-owned firm, provided a much-needed connection with the local black community. "We could deliver the message that the interest of Merrill Lynch was positive," says Bernadette Weeks Holman, an account supervisor at Stedman Graham. "Plus, it was coming from a face and a voice that they might more easily trust."

Networking with the right black organizations in Chicago was key to building attendance, says Holman. Months before the event, she met with the representatives of a range of groups, from the National Association of Black Accountants to the Broadcast Ministers Alliance, to scope out their interest-and to emphasize Merrill Lynch's commitment. "These are 'show me' people," she says. "They're approached for many opportunities. Showing up in their offices really made a difference." Indeed, nearly every person Holman met gave her the names of two or three other contacts. One of them was C. Adam Callery, president of the local chapter of the National Black MBA Association. Callery says he's noticed a heightened interest in the last two years by financial services companies wanting to "get in front" of his group, but Merrill Lynch stood out for one reason: Company representatives asked what his members wanted. "We told them we needed something broader than 'Here's How to Invest,'" he says. "Our members want information, like the advantages of international mutual funds over domestic ones."

Of course, not every investor is as astute as an MBA grad. Historically, black investors have been conservative, says consultant Boston, preferring to invest in insurance and real estate than in riskier stocks and bonds. They also gravitate to what they know. "We're interested in real estate because someone showed us how to buy a house," he says, only half in jest. Smikle at Target Market News says black consumers, particularly boomers, often don't play the stock market because they're saving for near-future events, like their children's college education.

So Merrill Lynch tailored the three-night series to suit the wide range of investment knowledge and attitudes of its participants. "We didn't want people to feel talked at," says Collins. "People would have seen through a product pitch in a second." Boston signed on as moderator, accompanied by a panel of African American consultants from Merrill Lynch's Chicago office. Two seminars-one targeted to small-business owners, the other for individual investors-were held at the DuSable; the third, designed for clergy and nonprofit organizations, took place at the Fellowship Missionary Baptist Church. Nearly 2,000 potential attendees received invitations in the mail last September and close to 600 came, often for more than one session. Evaluations turned in each evening indicated that people were pleased-and hungry for more. "When will we see you again?" was asked repeatedly, Collins says.

Merrill Lynch may expand the program in Chicago or to other locations. And while it's too early to measure direct sales originating from the event, appointments with black investors at the Chicago branch are on the rise, Collins says.

African American investment advisors will be waiting to greet them at the door. Merrill Lynch, as well as other financial firms, recognizes the importance of a minority presence among its employees, says Smikle. "Black consumers need to know that companies understand them," he says. "It helps if the hand reaching out to them is of the same color." It also helps Merrill Lynch measure its success in reaching the black community. Since there's no line on race on investment applications, companies can track the success of their black sales forces to estimate their market share in local black communities; 8 percent of Merrill Lynch's 14,000 U.S. consultants are minorities.

Currently, American Express Financial Advisors' multicultural efforts are considered the industry benchmark, says Boston. Besides launching a targeted marketing program five years ago, AEFA built an internal system to mentor black employees (American Express CEO Ken Chenault is also African American). And there are those American Express commercials featuring golfer Tiger Woods and his dad.

Despite the advances by Merrill Lynch and other financial firms, everyone agrees that more attention needs to be paid to black investors. "If you want to be a major player five or ten years from now, you have to recognize that black America is in the middle of an economic rights movement," Boston says. "That bodes well for banks, credit card companies, insurance, real estate -anything that builds net worth." Callery of the National Black MBA Association shares the sentiment: "All we need are the nuts and bolts," he says. Whoever provides the toolbox will be the real winner.

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