The last few years have changed the discussion on racial equity across the United States. The racial wealth gap remains central to this conversation, which encompasses increasing financial inclusion, creating equitable opportunities, and establishing generational wealth.
The gap in wealth between Black and White households in the United States has persisted over decades, to the extent that Black Americans today hold about 1.5 percent of the nation’s wealth, and the median Black family has about 13 percent of the wealth of the median White family.1 We also know that nearly half of Black households are underbanked and are more likely to fall victim to subprime financial products such as loans.
This disparity has a significant human cost as well as an economic cost. Wealth is not just an end in and of itself, but also a means of creating economic well-being for families. It protects families from financial shocks, whether from job loss or a medical condition or other unexpected expense. And it contributes to the resilience of individuals and their social networks and communities.
Wealth also enables families to invest in their own economic mobility. With wealth, people can invest in the education of themselves or their children, as well as in home ownership and entrepreneurship. Such investments generate social mobility—and additional wealth.
McKinsey Institute for Black Economic Mobility estimates that addressing the racial wealth gap could lead to an additional 5 percent of GDP growth in the United States.2 Financial services companies and the financial system overall must play a role in bringing about this change.
The role of financial services
The annual difference in wealth flows to White families and Black families is about $330 billion. Financial access and interactions with the financial system play a big part in that disparity. More than 75 percent of the difference stems from differences in return on investment, cost of debt, and intergenerational transfers.
When it comes to financial services, Black Americans and other people of color face inequities across the board, including lower access to financial institutions in their communities, lower approval rates, and less availability and participation across a range of financial products and services. By helping to address these inequities, financial services firms can contribute to solving this seemingly intractable problem.
It’s unequivocal that the financial services sector must play a role in addressing these disparities. Recognizing this imperative, McKinsey recently convened leaders across the ecosystem to discuss how the industry can ensure it is representative, inclusive, and in service of Black communities.
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