The Imperative of Inclusivity: Adapting Financial Services to Meet Diverse Consumer Demands
Financial services companies must consistently keep pace with consumer needs and desires. Historically, those needs and desires have been developed and articulated in an unconsciously biased manner, excluding multiple, less-privileged communities. And if there’s one resounding criticism we’ve been hearing more clearly, it’s the need for inclusivity in all areas of financial services.
“Financial inclusion is the bridge between economic opportunity and outcomes,” International Monetary Fund Deputy Managing Director Mitsuhiro Furusawa has said.1
Traditional financial services institutions, including retirement plan providers, historically have not served minority groups effectively or fairly, with economic opportunity and outcomes favoring privileged demographics.
There is extensive evidence spanning the breadth and depth of consumer financial products that shows how implicit bias, while not purposeful, creates circumstances where less privileged communities are not served or supported, as shown in the following facts:
- About 30% of LGBTQIA+ adults have experienced bias, discrimination or exclusion in the financial services sector, either from individuals or organizations, according to a recent survey from the National Endowment for Financial Education.2
- In terms of total retirement savings, annuity.org says that women have smaller retirement savings overall, with an average $57,000 saved, compared to men’s $118,000.3
- And more white Americans (44%) than Black Americans (33%) are focused on preparing for retirement as their most important financial goal, according to a study by Charles Schwab and Arial Investments. The study showed that White 401(k) plan participants typically invest 26 percent more per month toward their retirement accounts than Black 401(k) plan participants ($291 vs. $231).4
Where Are Your Blind Spots?
Inclusion or access tends to be viewed through a narrow lens. Regulations such as the Americans with Disabilities Act provides comprehensive civil rights protections to individuals with disabilities. Language accessibility has expanded over the years, given that it’s within common interests. But Black and LatinX Americans—especially in economically-challenged situations—women, and LGBTQIA+ groups, among others, are excluded from certain opportunities and outcomes due to organizational blind spots.
The following are typical blind spots that surface as you review content and services provided by DC plan providers:
- Everyone has a bank account – If people are not able to access even the most basic financial services, it has a negative impact on their financial lives. A 2019 Federal Reserve study found that 22% of American adults (63 million) are either unbanked (6%) or underbanked (16%). The unbanked and to some extent the underbanked rely on payday loans, check cashing services, money orders and pawn shop loans to take care of their finances, which often come with their own set of costs and are never addressed in defined contribution educational materials.
- Retirement is the most important financial objective – Before we can even begin the conversation about retirement savings, we have to address basic financial foundations. About 56% of Americans are unable to cover an unexpected $1,000 bill with savings, according to a telephone survey of more than 1,000 adults conducted in early January by Bankrate. If there’s little or no access to liquid savings to address potential emergencies, saving for retirement will remain out of reach.
- It’s all about the assets – Account aggregation services focus exclusively on assets and far less often aggregate debt into their offering. The Federal Reserve’s latest triennial snapshot of household finances found just over 45% of all U.S. families reported revolving balances on one or more of their credit cards, with the median revolving family owing $2,700 in unpaid balances and the average revolving family owing $6,270.5 Education and service to address these issues are scarce despite the prevalence of the issue.
If a company doesn’t understand specific situations that people of certain groups are facing, its teams will be unable to develop and market solutions that appeal to them. Addressing this begins with addressing structural challenges within the firm.
According to the University of North Georgia, structural bias refers to the institutional patterns and practices that confer advantage to some and disadvantage to others based on identity. It occurs because:
- Positions of power tend to be held by members of a dominant group.
- Excellence tends to be identified with that group.
- Attention tends to be centered on members of that group (the “norm”).
Leveling Up Your Inclusivity Practices
Like any core business practice, there is a continuum of sophistication through which companies journey to understand and deploy equity and inclusivity to their organization and their external offerings. Basic practices including hiring a DEI lead and standing up Employee or Business Resource Groups, to more advanced practices of measuring implicit bias within the organization and testing the implicit bias that may exist in current marketing materials and product designs.
Others may have already implemented teams with meaningful diversity and are developing products that are truly inclusive with inclusive messaging, and are looking to find even more ways to expand that inclusivity. These are all ways to understand where a particular firm fits on the continuum.
So, while your broader enterprise is somewhere on this journey, as the business leader of a DC plan provider, what can you do today to improve the inclusiveness of your offerings and thus the overall value you provide to your clients?
Our recommendations to getting to the next level include:
- Understanding the DEI programs of your top clients.
- Assessing your participant communications for inclusive communications standards.
- Measuring your organization’s level of inclusiveness via external assessments
- Assessing the degree of product applicability to your participant base (assessing participant demographics compared to the educational topic and product matches to the needs of the participant base).
- Building a more inclusive messaging platform.
- Completing the product portfolio to address the needs of underserved participants.
By understanding where you are and where to head next, you’ll find the right next steps on a continuous improvement journey that will ultimately help make your organization more inclusive and equitable—from the inside out.
1 “Financial inclusion: Bridging economic opportunities and outcomes,” International Monetary Fund, September 20, 2016, imf.org
2 National Endowment for Financial Education survey, May 2022
3 “50+ Essential Retirement Statistics for 2022,” Annuity.org
4 “Black Americans Continue to Trail Their White Counterparts in Building Wealth,” Charles Schwab/Ariel Investments Black Investors Survey, 2021
5 “Revolving debt’s challenge to financial health and one way to help consumers pay it off,” Brookings, June 7, 2022)