PRNewswire - The percentage of high-income African Americans who own stocks and stock mutual funds is up considerably over the last two years, according to the annual Ariel/Schwab survey comparing investing habits among Blacks and Whites. Blacks, however, remain more financially vulnerable in retirement than Whites, partly due to greater family obligations and a tendency to put more of their savings into college for children rather than into retirement accounts.

The survey of 605 Blacks and 607 Whites earning over $50,000 annually, shows that 64% of African Americans are investors in the stock market today, compared to 57% just two years ago. Among Whites, the percentage who own stock investments has held steady (81% in 1998 and 82% today).

"The growing participation is great news for the African-American community. They're capitalizing on the bull market of the past few years and seizing the opportunity to build wealth," said David S. Pottruck, President and Co-CEO, The Charles Schwab Corporation, who announced the results at a New York press conference.

Ariel President John W. Rogers, Jr. added, "The growing comfort with stock investing among African Americans is a positive sign. The challenge ahead is to help our community better prepare for retirement through stock market investing while meeting their other obligations."

This is the third annual survey of Black and White investors commissioned jointly by Chicago-based Ariel Mutual Funds and leading financial services firm Charles Schwab & Co., Inc. This year's survey was conducted by Neuwirth Research Inc. (These entities are not affiliated)

Family Obligations/Education Drive AA Savings

For the first time, this year's survey probed family issues and found that 32% of Blacks expect to support adult children compared to 20% of Whites, and 45% of Blacks expect to support aging parents, compared to 29% of Whites.

Interestingly, Blacks under the age of 35 were most likely to say they would support both adult children and aging parents. As in prior years, Blacks with retirement accounts have considerably less saved for retirement than Whites with retirement accounts ($44K vs. $69K) and fewer Blacks (33% vs. 49%) listed "retirement" as their most important reason for saving. Saving for children's college education ranked somewhat higher for Blacks (22% vs. 16%). Accordingly, the survey found that Blacks have saved slightly more for education ($12,289) than Whites ($12,239).

"Many Black families will trade away a comfortable retirement to send their kids to college. For a lot of African Americans, a leisurely retirement is viewed as a luxury," said Mellody Hobson, Senior Vice President of Ariel. To this point, when asked how they plan to spend their retirement years,  just 41% of Blacks listed "more time on leisure activities," compared to 56% of Whites.

The education versus retirement conflict is sharpest among Blacks under 35, with twice as many Generation X (under 35 years) Blacks as Whites (31% vs. 15%) citing children's education as their most important reason for saving, and half as many (21% vs. 42%) listing retirement.

More African Americans than Whites (39% to 33%) cited "education" as the key to financial success, as opposed to just working hard (25% vs. 40%.) Though education is viewed as the great equalizer, 68% of Blacks and 44% of Whites agreed that African Americans don't receive as good an education as Whites.

Blacks and Whites Support Diversity Programs For Financial Industry

Unlike past years, the current Ariel-Schwab survey probed into race- related barriers that may contribute to less financial optimism by Blacks. High percentages of both Blacks and Whites agree that race-related obstacles impede Black wealth creation. Moreover, both groups believe the financial services industry can help African Americans overcome barriers to wealth creation by aggressively promoting workforce diversity.

Specifically, 81% of Blacks and nearly half of Whites (49%) believe "racism continues to be a major obstacle for African-American wealth creation," and 75% of Blacks and 52% of Whites believe Blacks are at a disadvantage because they are "less likely to have a financial head start." Younger Blacks, however, are less concerned with racism as an obstacle for wealth creation compared to those over 50 years of age (75% vs. 87%). And among non-investors, 62% of Gen X Blacks plan to begin investing this year, compared to 45% of older African Americans.

Overall, 75% of Blacks and 61% of Whites agree that there are not enough African-American role models in the financial industry. Equal or greater margins (79% of Blacks and 60% of Whites) also think the industry should practice affirmative action to increase diversity, though support is lower among Gen X Blacks than among those over 35 (71% to 82%).

Some of these attitudinal differences among younger Blacks reflect their changing upbringing. The survey found that, compared to Blacks over 50, Blacks under 35 are more likely to have come from a financially secure background (56% vs. 37%); received an allowance (58% vs. 40%); and had a family who has previously invested (30% vs. 15%).

The findings further suggest that financial service companies could possibly attract more business from African-American investors if they hired minority brokers, with almost half of Blacks (49%) saying they would prefer an African-American advisor, and only a third saying it doesn't matter. Finally, 40% of Whites, and 61% of Blacks, said they would like to have a Black-owned mutual fund among the investment choices offered in their company 401K Plans - which have been the gateway to stock market investing for many African Americans.

"These results validate what Schwab and Ariel have known for some time - that Blacks seem to be hungry for investment knowledge, and a tremendous opportunity exists to help empower African American investors," said Michael DeFlorimonte, Vice President in charge of Schwab's African American Marketing Initiative. "While we continue to recruit and train African Americans, our challenge is to demystify the stock market, and make people realize that investing is color-blind."

Spreading the Wealth

To a greater degree than Whites, Blacks surveyed support social spending programs, even when it means paying higher taxes. By a 65% to 53% margin, more Blacks said, "This country would be better off if the wealthiest paid more taxes to help the poorest people." Even among those with incomes above $100,000, Blacks outpolled Whites on this question 55% to 41%.

More Blacks than Whites also favored spending the federal budget surplus on domestic programs (45% to 30%) and preserving Social Security (25% to 20%) rather than using the money to lower taxes (13% vs. 19%). Not many Blacks or Whites, however, expect Social Security to be their "most important" source of retirement income (9% and 5% respectively.) Like their white counterparts, they will rely most heavily on employer-sponsored plans (29% and 40%), IRA's (22% and 18%), and "other personal savings and investments" (15% and 17%).

Ariel Capital Management Inc. is a Chicago-based investment firm managing over $3 billion in assets for institutions as well as individuals through the Ariel Mutual Funds. Ariel's web site is http://www.arielmutualfunds.com. Charles Schwab & Co., Inc. (member SIPC/NYSE), is one of the nation's largest financial services firms serving 6.7 million active accounts with $765 billion in customer assets. The Charles Schwab web site can be reached at http://www.schwab.com .

Ariel Mutual Funds, Charles Schwab and Neuwirth Research are not affiliated.