Bridging the Divide between Economic Opportunity and Economic Outcomes

Audio Description

A wide and persistent racial wealth gap exists in America. But knowing this hard truth is not enough. How can we work towards financial inclusion for Black Americans and bridge the divide between economic opportunity and economic outcomes? James Seth Thompson and guests Aria Florant and Shelley Stewart from McKinsey & Company hone in on ways to close the racial wealth gap by way of inclusion to meet the need of economic prosperity.


00:00 - 00:17

We are living in an unprecedented and challenging time, one where our nation's headlines have shifted from the disproportionate impact of COVID-19 on African Americans and communities of color to another painful reminder of the social injustice that continues to plague our Black communities.

00:18 - 00:40

This episode of Changing the Trajectory was recorded prior to the national protests in response to the death of George Floyd and those unfortunately preceding his. The current state of affairs and the worldwide outcry serves as a powerful reminder that the pre-existing conditions caused by systemic inequity impacts every facet of the African American experience.

00:40 - 01:09

Simply put, the measures and actions that support access and sustainability for the health, welfare, and prosperity of African American lives continues to be stripped away. No matter how you look at it, the virus and injustice can literally take your breath away. Many of the ideas, dialogue and solutions in this two-part series and certainly in episodes to follow, will address issues commonly at the root of COVID-19 disproportionate impact and injustice.

01:09 - 01:40

My hope is that all who fall victim to the vicious cycle of inequity and the incidences of discrimination will soon benefit from policies and practices that bring about true solutions for the lives and livelihoods of all African Americans. So here's a fact. There is a wide and persistent gap in wealth between White and Black communities in America. We know that this gap is a result of systemic contributors and is a burden on Black Americans and the economy as a whole.

01:41 - 01:47

But what can we do with our knowledge? How can we work towards a solve in bridging the gap?

01:47 - 02:19

Exclusion has been the emphasis for far too long. Let's begin with a focus on closing the racial wealth gap by way of inclusion to strive to meet the need of economic prosperity. Welcome to Changing the Trajectory, where we focus on the lasting impact we have the power to create in multicultural markets and communities. I'm James Seth Thompson, Bernstein's Head of Diverse Market Strategy, and I'm again joined today by Aria Florant and Shelley Stewart from McKinsey & Company.

02:20 - 02:45

Aria is an engagement manager based in Washington, DC. Her client work focuses primarily on helping transform public and social sector organizations. Shelley Stewart is a partner at McKinsey & Company based in the New Jersey office. Shelley's work focuses primarily on commercial and strategic transformations across a range of business-to-business companies. Thank you guys again for joining us today. Thanks for having us. Thank you for having us.

02:45 - 03:02

So, in Part one, we had a great conversation that was really focused on the preexisting conditions that have been exacerbated during the time of COVID-19. But what we discuss and what we know is that these conditions are systemic and will still last post pandemic.

03:03 - 03:28

So I want to take the opportunity to talk about the things we can concurrently think about, recognizing that, yes, those pre-existing conditions will exist. But how can we take the opportunity to begin to move to a more solutions-based conversation? You know, specifically, we can certainly talk about the economic and livelihood side of things today, and I'm looking forward to that part of the conversation.

03:28 - 04:01

Today's discussion, like the first discussion we had, is inspired by some of your research. The first report, the case for accelerating financial inclusion of Black communities and the impact of closing the financial wealth gap. I'd love to start this conversation with the two of you offering some context and provide a general overview of what the report's cover so we can expand on that during our discussion today. Let's start with Shelley. I'm happy to start. So we're going to talk a little bit about some of the work that we've done around accelerating financial inclusion.

04:02 - 04:25

This is a topic that fits into the broader discussion that we've been having, which started from an article in report reference last week around the economic impact of the racial wealth gap. We view financial inclusion as a big enabler to facilitating the closing of that gap.

04:26 - 04:47

Many folks start with the premise that since Black folks don't have a lot of wealth and generally have lower incomes, it's too early to be talking about broader financial inclusion because that kind of comes after you have some baseline. And I think that represents a bit of a misunderstanding. It is this virtuous cycle, so to speak, of wealth creation.

04:47 - 05:07

And we really view, and some of this came out of language that the International Monetary Fund uses, but financial inclusion really is that bridge between opportunity ("So I got this job and I'm earning income") and translating that opportunity into improved sustainable economic outcomes.

05:08 - 05:42

So what we're trying to accomplish with this recent piece that we produced on accelerating financial inclusion for Black communities is to engage a set of stakeholders, in particular financial service institutions around one, the financial opportunity that is in front of them from more inclusive practices, in our analysis, focused on Black Americans, but two, how that will help accelerate financial outcomes for Black Americans, which again, in this rising "tide lifts all boats" with this notion,

05:43 - 05:48

everyone has a vested interest in getting this right. And so that's what we're going to talk about today. Thanks.

05:48 - 06:03

Aria, just to piggyback on Shelley, the report does a great job talking about the tenets, the pillars, the pieces of the financial inclusion puzzle. Can you expound on that a little bit for us? Yeah, absolutely.

06:04 - 06:35

You know, so we take a pretty expansive view of what financial inclusion really means. I think in the past that has been kind of reduced to like small things, like whether or not high-school students learn how to budget and learn how to save money. But we think about this from a much more structural perspective, and that it's not just about individuals' choices, but it's about the structures of inclusion or exclusion that enable people to do exactly as Shelley said, convert income into wealth.

06:35 - 06:38

And so we look at this based on kind of five pieces of the puzzle.

06:38 - 07:08

The first is really sort of being able to accumulate long-term wealth, and often for Black folks, that happens around buying your home. There is also holding insurance against key risks. So a big one there, in particular in this  present moment, is health insurance. The third one is sort of making everyday transactions. And so this is just about being banked. And we know that Black folks are not actually buying at the same rate as White families.

07:08 - 07:35

The fourth is accessing credit, just a big one around making sure that Black families have the liquidity they need to survive tough times like this one, but also, like, invest in things to the long term. And then finally, it's really about planning ahead for big goals. So having something left over after all of that to set aside and actually save for higher education or retirement, et cetera.

07:35 - 07:45

So those are kind of the biggest pieces that we look at. And, you know, there's a history for Black Americans around structural inclusion across a lot of those. Right.

07:45 - 08:20

About the types of jobs that we've been able to have, about where we live, about the types of loans we've had access to. And so a lot of what Shelley just alluded to around, like, there's such an opportunity for financial institutions to think a little bit more critically about how they incorporate equity into their products and services, because that is what will benefit all of us in the long term. And I would imagine that being banked and have access to credit, all of those things that go into Black Americans' ability to accumulate wealth so then eventually allocate wealth.

08:20 - 08:20


08:20 - 08:25

Like how you actually build generational legacy for your families.

08:26 - 08:43

My guess is that there is a contribution, a positive contribution to some economic factors maybe along the lines of GDP if you have more individuals being able to contribute to the economy. Can you talk about that a little bit? Absolutely.

08:43 - 09:14

I think there are two points that I'll just touch on. One, I reference an Aria reference. But just from a sector perspective, financial services, we believe, and we spend in the report at a pretty granular level, that many of those institutions are leaving money on the table by not being more inclusive. And we've actually broken that out at the product level. And so we think that's a huge opportunity to their top and bottom line that should be considered. But if you zoom out a level, James, to your point,

09:15 - 09:49

as I mentioned, we've done the work to quantify what would happen from a GDP perspective if we were able to close the racial wealth gap over the next 10 years. And the figure is something like 1.5 trillion of incremental GDP each year when you hit that run rate in year 10. And the point on that is, we live in a consumption-based economy. I mean, you can, people can debate. But I think the data is pretty clear that consumption is a big driver of our economy.

09:49 - 10:05

Consumption can only happen if people have, frankly, the financial means to sustainably do that. And so what we are suggesting is that financial inclusion, that bridge from

10:06 - 10:26

economic opportunity to sustainable outcomes will allow Black Americans to participate more fully in this economy, which will benefit all citizens, all people that live here. Small business owners, large business owners, all different companies of all sorts, the travel and leisure industry when that comes back, etc.

10:27 - 10:50

And so we really do believe that this is foundational for, frankly, all populations that are vulnerable or skewed towards lower socioeconomic pockets, and everyone in the economy has a vested interest in addressing this. Yeah, yeah. And I would just add, I just put some Shelley's point.

10:50 - 11:25

And I also want to say that we recognize that there has been a history of exclusion as well. There are events and policies that have made it really difficult for Black folks to feel included, in particular in this financial services ecosystem. And so there is good thinking about this in terms of how do you develop products and services that are serving Black communities better. But then also, how are you thinking about the way that your company operates in order to rebuild trust with Black communities in a way that will make it easier and just more likely for Black folks to want to invest?

11:25 - 11:28

That's such a huge point. It kind of leads me to one thought.

11:28 - 12:00

And I do want to transition a conversation to specific components of wealth generation for families. You know, I often define what wealth is, what wealth is a very subjective term. Sometimes it might turn people off because we talk about wealth. It just means super rich, or super wealthy. But at the end of the day, wealth is the abundance of something you value. Right. So as we are talking to our listeners and those we engage with on a daily basis, you know, this idea of accumulation before allocation is really key.

12:00 - 12:06

It's also about what you keep and not necessarily what you make or earn. Right.

12:06 - 12:19

So, you know, this idea of wealth does involve being mindful of accumulating the assets, but also being mindful of keeping what you can to kind of build that legacy.

12:19 - 12:47

And, you know, in the report, you guys break down this idea of wealth generation and the different elements that account for that and Black families' ability to build legacy for future generations. But you also talk about the community context piece, and I think that's really fascinating, this idea that 65 percent of the Black population is concentrated in 16 states.

12:47 - 13:16

So let's transition to have a conversation about the actual components of wealth generation, and I'd like you guys to start with expounding on this amazing fact and data point. Sure. Happy to to talk a bit about the frame and Aria, you should jump in with some more specificity. But what we set out to do in developing this perspective on closing the wealth gap was one, as we mentioned, actually sizing the prize for the US economy.

13:16 - 13:35

But that was just a, that's a bit of an academic exercise. And if you leave it at that, it's just the number to stare at. So we try to transition to how do you go chase that number? And like any big problem that any company tackles or any government or any social sector or organization, we try to split into its elements.

13:36 - 14:02

And so we landed on this four-part framework, which you reference, community wealth being the first stage in that. This is really about the communities that Black families are born into and live in and the infrastructure in those communities, the assets, the enablers that improve livelihoods, digital infrastructure, physical infrastructure, public education, etc. That's the starting point.

14:02 - 14:32

We then move to family wealth and I'll come back, James, to community. Family wealth. This is about the assets and resources that a family unit has to be able to help, for lack of a better term, better the circumstances of the generation that came before them. So those that family wealth can help supplement and augment the community wealth context. And as we know, family wealth for Black Americans tends to lag behind, which is the starting point is very challenging.

14:33 - 14:57

We then move to family income, which is, when I get up and go to work every day, what sort of sources of income do I receive, and how does that compare with other demographic groups or other folks in society, and income being obviously a big component to wealth generation over time. So the third stage we focus on is income.

14:57 - 15:14

And in the last stage, which we actually started with it this discussion, is around family savings. And that's a lot of how do we leverage the financial services sector in offering to translate that income or that past wealth into sustained and additional wealth over time.

15:15 - 15:43

So those are the four stages of the journey. If I go back on community wealth, this idea of Black Americans living very concentrated in a set of states and frankly even more concentrated in those states in a set of counties is something that I think intuitively many people who follow this sort of thing might expect. I think we were surprised at the magnitude of just the level of concentration, if you will.

15:44 - 16:09

That was one thing. I think the second thing that we found is, unfortunately, if you take a set of objective measures that look at public infrastructure investment, job growth, wage growth, health care infrastructure, on average, those states where Black Americans live, they tend to lag on all of those different measures and indicators.

16:09 - 16:09


16:09 - 16:42

Which is, which presents quite a challenge. And so the good news is with this daunting problem we face, we actually have a sense of where Black people live. So we know where to go. We know where to search resources, into which communities. And we have a good sense for what resources pay dividends— infrastructure, physical infrastructure, education, economic development. And so what we're really trying to push is, this is not about one thing, I want to be clear on, because we've had this discussion with a lot of different voices—we're not saying that Black Americans need to get up and move from those places.

16:43 - 16:51

We can have a whole another debate in another time about whether more mobility is good and whether you should be flowing toward places that have massive tailwind.

16:52 - 17:20

But we know that's actually not a feasible response to this. What is more practical is acknowledging the concentration, acknowledging the lack of resources and investment and traditionally in the infrastructure in those places and working collaboratively as a private, public, and social sector, collaborative effort to surge resources into those places in areas that we know will have higher [...].

17:20 - 17:50

I think that that's so key. Aria, do you want to add anything there? Yeah. You know, I mean, I'm so glad you asked about community context, because I just think it's such an important one. It's really the foundation for the others and it's showing up so much in this kind of COVID as well. I mean, I actually think that the question about mobility is more just a short-term versus a long-term one. Obviously, people aren't going to move at the drop of a hat, but there are kind of things to think about with regard to families just having choice about where they live.

17:50 - 17:57

The other thing I want to double click on, Shelley obviously mentioned infrastructure. A big thing that's coming up right now is just broadband. Right.

17:57 - 18:30

And the people who actually have the ability to work from home, to learn from home, to access telehealth services from home, we know that Black folks are less likely to have the infrastructure to do that. And so I think as we started getting heavy here, as we think about solutions, right now, we have this amazing opportunity to kind of use the burning platform of COVID to get people to collaborate, to work on issues that sometimes take real partnership across sectors. And I think broadband is a big one.

18:30 - 19:02

It can have a really big impact across a number of different areas. Yeah, you know, when I think about community context, I typically land on a narrative that I talk about all the time. And it's really being intentional. Right. And in how you define your role in making an impact, you know, there are individuals where, you know, they need a wealth of access to technology and education, as you mentioned. There are individuals who have assets and means, who could contribute to

19:02 - 19:31

organizations, grassroot-like organizations who, whose work in programmatic work is really to address the challenges in these communities. There's corporations and organizations who can be very intentional on how they spend and where they spend with respect to hiring vendors and things like that. And, you know, I think the banks also need to participate in this effort.

19:31 - 19:51

Right. There's likely not a minority-owned bank in these communities, but for the banks that do exist in the communities to be very intentional and deliberate about providing access to resources and loans and capital to allow people to affect and impact those communities.

19:51 - 20:13

I certainly think all of those things are part of the intentional ways we can think about the community context piece here. Before we kind of wrap up the conversation, you know, I always like to ask if there is a final call to action that you have for the people you engage, certainly our listeners, with respect to financial inclusion and closing the wealth gap.

20:13 - 20:44

Maybe I'll start, Aria, and then turn it over to you. My perspective on this is there's a lot that we can do. My general view is these are important issues. Now is the time to try to tackle them. We use COVID as unfortunately a forcing mechanism to show the worst of what happens when you neglect these socioeconomic disparities over time, maybe not even the worst, but a very bad, very bad outcome.

20:44 - 21:16

The data is clear on that. So agitate. Individually, how are you supporting Black-owned businesses that are in your community or not even, or not even in your community, but how are you being deliberate about that? The coffee shop, the TaskRabbit vendor that you get to choose when you're, when you're scrolling through looking for your handyman help, what have you. How are you being deliberate about that? That's one. If you think about if you're not an entrepreneur, you go to work every day.

21:17 - 21:40

James, frankly, you a great example of this, how are you going to work every day in your traditional context and ensuring that this dialogue, both in terms of the business opportunities it presents for your employer, but also in terms of the impact on people's lives, that that dialogue is a part of what you do when and where appropriate.

21:40 - 22:02

How are you bringing that dialogue, whether it's supporting recruiting efforts, supporting advancement and retention efforts for certain populations, tailoring products in a thoughtful way that expands the customer base for your company while also doing right by a potential set of consumers. So that, I think, is a second piece, which is in your work life.

22:02 - 22:35

And then lastly, you know, regardless of your political affiliation, how are you engaging? I just, I don't want to presume, to direct anybody which way to go. But how are you engaging in the broader set of dialogues around policy and equity in your local communities, in your city, and your state, at the federal level? And I think those, in those three different buckets that some sort of agitation and being proactive to me is the call to action.

22:35 - 23:06

Yeah, Shelley did a great job. I mean, that's sort of amazing tactical ideas, I think. I mean, I'll zoom out and dream for a second. There's a lot of things that we can think about as a society during this time that are sort of like, how do we kind of leapfrog into the future and reimagine systems as we're rebuilding them after COVID to make them more equitable. So one example of that that I get excited about is telehealth, honestly, because it's kind of a weird thing.

23:06 - 23:39

Right. And it takes a little bit for someone to get over kind of the tech adoption barrier of being willing to see a doctor through their phone. But right now, because we're being forced to, it means that everyone's getting more comfortable with it. And so what if we could actually roll that out in a big way right now, if you like, it could actually make it much easier for vulnerable communities, people in rural areas and in particular Black communities to get access to healthcare in a way that wouldn't have been possible had it not been for this burning platform.

23:39 - 24:05

So I think there are things we can do there. Another thing is around credit scoring. There's a lot of really innovative kind of capital flow happening right now. And so how are we capturing actually, like, who's receiving it and whether or not we can actually create more innovative, different ways to think about people's creditworthiness that could then translate to their creditworthiness years down the line. So those are a couple of examples.

24:05 - 24:25

But I think there really is a big opportunity here to get imaginative about the different things that we can do in the long term to serve the black folk in a better way. I'd love your thoughts on the telehealth model, but I think a lot of what we talk about has everything to do with this idea of just providing access.

24:26 - 24:44

Right. And, you know, we could be intentional in mind and in thought, but if we are not leveraging that intent in agitating the system enough to provide access from an economic or health and livelihood perspective, I think we'll continue to trip over our own feet.

24:44 - 25:11

So I really appreciate that. I mean, that's some great insight. And look, I'm just happy that we've had another opportunity to have a very meaningful conversation. I know for a fact, you know, we collectively share this goal of always finding ways to, Sheley, as you mentioned, leveraging our careers, right, to impact communities and the things that we care about the most and helping Black communities prosper. So thanks again for leveraging your thought leadership.

25:11 - 25:41

Thanks again for leveraging your research and sharing your research to provide a framework for how we can think about moving beyond preexisting conditions. I'm certainly committed to having multiple conversations around, you know, fixing and addressing the challenges going forward. And I think you guys have helped me create a good baseline and talk track. So thanks again. I really appreciate it. Thank you for having us. So I hope you enjoyed today's episode.

25:42 - 26:11

We'd love to hear from you. So please e-mail your thoughts, questions, and any feedback you may have to diversemarkets@ Be sure to share, subscribe, and rate us on iTunes or anywhere you listen to podcasts and check us out on Twitter @BernsteinPWM. Stay safe and have a good one. Bernstein: Making money meaningful for individuals, families, and foundations for over 50 years. Visit us at

James Thompson
Senior National Director—Diverse and Multicultural Wealth Segments

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