December 7, 2022

How to create wealth and professional success

To celebrate Black History Month, CNBC Invest in You features weekly stories from CNBC contributors and members of the Financial Wellness Council, including the lessons they learned growing up, their advice for young black people, their sources of inspiration and how they work to close the racial wealth gap.

As protests swept the country last year, companies began announcing initiatives to promote greater diversity, equity and inclusion (DEI) within their ranks. Companies have pledged over $50 billion to these subsidy programs.

It’s a lot to do. Data from consulting firm Mercer shows that 64% of entry-level workers are white, while white workers occupy 85% of management positions, indicating a promotion gap.

The Marriott Foundation recently donated $20 million to Howard University to build a pool of students for leadership positions. Anthony Wilbon, dean of the Howard University School of Business, told CNBC on Wednesday, “Companies with a much more diverse management team have a greater likelihood or opportunity to outperform their peers.”

To help younger generations succeed, several other black leaders in science, business and finance recently shared their lessons and visions for the future with CNBC.

A lack of diversity can stifle innovation and foster groupthink. DEI also helps attract top talent. In a recent CNBC | In the Momentive Workforce Survey, nearly 80% of respondents said they would like to work for companies that value and promote diversity, equity and inclusion.

Americus Reed, CNBC contributor and professor of marketing at the Wharton School at the University of Pennsylvania, wants future leaders to seek out and encourage diverse perspectives in their organizations, but cautions that these efforts need to be done in the right way. “My advice to future leaders is to be very careful when it comes to diversity, inclusion and equity,” Reed said.

It is not enough to create programs.

“You have to create it, but also manage it. We need to understand how to integrate different perspectives into our decision-making – in our businesses, our brands, our organizations. And we need to cultivate those diverse perspectives and manage them appropriately so that we can create the kinds of organizations that can thrive.

Starting a business is difficult, to say the least. There are approximately 30 million small businesses in the United States and many do not survive. Twenty percent of businesses fail in the first year, 30% in the second, and in the tenth year 70% of businesses fail.

For minorities, the figures are even more worrying. Eight out of ten black businesses fail in the first 18 months.

For Kourtney Gibson, president and partner of Loop Capital Markets, the most important thing people can do to transform the financial future of black Americans is to own them. “We can all help make the American dream a reality for everyone. Set a goal, measure it, monitor it. We have KPIs for everything we do in the business, from revenue measurement to profitability to operating margins. Why not set a goal for black economic inclusion? What gets measured and motivated gets done.

Gibson is currently a board member of Canadian sportswear brand Lululemon. Lululemon is a founding sponsor of the Canadian Journalism Foundation Black Journalism Fellowship.

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Isaiah McKinnon began his 50-year career in public service in 1965 as a patrolman with the Detroit Police Department. When he started, he was one of fewer than 100 black officers out of the approximately 5,500 officers in the force. McKinnon, an Air Force and Vietnam veteran, has become the “flagship” of a campaign to recruit more minorities into the force.

Nearly three decades after joining the force, McKinnon was named Detroit’s police chief. At the time of his appointment, McKinnon openly criticized the department’s politics he had witnessed. He quickly shifted the department’s focus to community-oriented policing, aiming to bridge the gap between law enforcement and communities by inducting officers directly into communities. “I’ve known hate because of the color of my skin, but I’m using that to create change,” McKinnon said.

A graduate of the FBI National Academy and the US Secret Service School, McKinnon has met many dignitaries, but one in particular catches his eye. “I have met six Presidents of the United States and countless other leaders. But the one who really taught me what it means to create wealth was Nelson Mandela. He inspired me to believe that the real Wealth comes from education, dedication, perseverance, love, hard work and sacrifice.That’s why I stand as tall as I do today.

McKinnon is the author of three books, Stand Tall, In the Line of Duty and North Between the Houses.

Despite the gains in income and wealth of black families in America, white families have on average up to seven times more net worth.

However, in 2021, black purchasing power reached $1.6 trillion, with the ability to buy, save and invest having nearly doubled since 2000.

Lanzetta Braxton is co-CEO of financial planning firm 2050 Wealth Partners.

Just as commodity market expert Helima Croft recently told CNBC, Braxton says Black History Month is a time to celebrate and reflect on the contributions of the black community. “For me, Black History Month is an opportunity to highlight and celebrate the contributions of black talent in the United States and around the world. As a black financial planner, I see the history of Black people get it done every day by empowering black households, living their financial plan, and living the life and legacy they deserve.

Achieving a middle-class lifestyle has long been a symbol of the American Dream, representing financial security and the foundation for children to flourish. But the dream of a medium-sized company is no longer the same as before.

Historically, institutional barriers such as redlining have prevented many black Americans from accessing the wealth-creating resources available to white Americans.

Before the pandemic, black homeownership had already reached an all-time high of 40.6%, compared to 76% for whites. According to the Urban Institute, the huge gap between white and black homeowners is wider today than it was in the 1960s, when housing discrimination was legal in the United States.

Bonawyn Eison, senior director and managing director of equity derivatives at XP Investments, wants the same barriers that prevent black people from building wealth to be removed. Access to capital and non-discriminatory lending practices are essential to wealth creation.

“How can our country help the black community financially? This is literally the trillion dollar question. I believe that the same legislative and institutional powers that were put in place to create barriers to entry must now be used as tools to break down those same barriers. Particular attention needs to be given to things like access to capital, dark venture capital funding, lending practices and fiscal maneuvering to achieve real reform and impact.

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