2nd Ariel/Schwab Survey Probes Deeper Into Why Blacks Remain Underinvested.

NEW YORK--(BUSINESS WIRE)--May 14, 1999--

African American Females are Slowest to Earn But Eager to Learn

With the bull market still surging to record highs, high income African Americans are more interested than ever in becoming stock investors -- naming it their number one goal for 1999 -- but they remain underinvested due to formidable cultural and demographic factors, according to a survey commissioned by Ariel Mutual Funds and Charles Schwab & Co., Inc.

The survey found Black women, in particular, are least likely of all groups surveyed to invest in stocks.

The 1999 Ariel/Schwab Black Investor Survey, unveiled today during a press conference at the New York Stock Exchange, probed a range of cultural factors, such as spending patterns, upbringing and overall attitudes toward the investment community, that have led many Blacks to keep most of their assets in banks, real estate and whole life insurance rather than with brokerage firms or mutual funds. The survey suggests, however, Black women are less skeptical of the industry as a whole than Black males and more open to seeking professional investment advice.

"After working so hard to join the middle class, many Blacks are still missing out on the greatest wealth-building opportunity in American history. But the industry is starting to reach out and our community is responding," said John Rogers, President of Ariel Mutual Funds.

The poll of 813 Blacks and 816 Whites with incomes of more than $50,000 was conducted by Yankelovich Partners. It is the second poll jointly commissioned by Ariel and Schwab as part of a larger initiative by the two companies to attract African American investors.

High Interest and Internet Access Suggest Positive Trend

The poll showed African Americans were more likely than Whites to have read books about saving and investing (58%-46%), attended an investing seminar (28%-22%) or joined an investment club (10%-5%.) Among non-investors, 48% of Blacks (versus 34% of Whites) said they were likely to start investing this year. And, by a 35% to 20% margin, more Blacks chose saving and investing as their top New Year's resolution. Moreover, Blacks at this income level, and Black women even more so, have almost the same level of access to the internet as Whites (70% vs. 77%) and over half of both groups surveyed have used the internet for investment-related activity.

David Pottruck, President and Co-CEO of the Charles Schwab Corporation said the goal of the joint initiative is to turn every African American saver into an investor. He added, "The heightened interest among African Americans is especially encouraging, and the high level of Internet access offers the industry a direct path of communication. Like any other segment of the market, the more information they have about investing, the more likely they are to achieve their investment goals."

Black Investment Portfolios Still Favor Banks, Insurance and Real Estate

Last year's survey found just 57% of Blacks owned any stocks at all, compared to 81% of Whites. This year, we learned that by a 56% to 71% margin, Blacks are less likely to even have a brokerage or mutual fund account, yet are more likely than Whites (65% to 58%) to have an account with an insurance company.

When Blacks were asked where they keep "most of their assets," 44% said banks, versus 31% of Whites; 17% of Blacks said insurance companies, compared to 10% of Whites; and just 30% of Blacks listed mutual funds or brokerage houses, compared to 51% of Whites. In every category of investment product, including IRA's, mutual funds, brokerage accounts, and money market accounts, Black women were last in terms of ownership.

This year's survey also probed deeper into the historical preference African Americans have for real estate investing. According to the survey, 39% of Blacks (versus 30% of Whites) called real estate the "best investment overall," with many agreeing that it is "tangible," "you can borrow against it," use it to earn "extra income," and "you can pass it down to heirs." By contrast, 47% of Whites felt stocks were the "best investment" compared to just 32% of Blacks. Despite these differences, both groups define real estate in the same way.

Cultural Preferences and Demographic Characteristics Reveal "Why" Blacks Don't Invest

Beyond paying for basic necessities, spending patterns differ between Whites and African Americans. According to the survey, 29% of African Americans say their number one expense after necessities is their car payment followed by their children's education (25%), whereas 31% of Whites say their number one expense after necessities is investing, followed by their car payment (25%). When asked their number one goal for saving, Blacks consistently rank retirement lower than Whites (33% vs. 54% in 1999; 37% vs. 58% in 1998).

African American household income must stretch further to support more people, including more school-aged children and extended families. Black households are more likely than White ones to have children present under age 18 (53% vs. 46%), are more likely to be composed of single parents with children (16% vs. 5%) and are more likely to financially support people outside of their immediate families (27% vs. 12%). Blacks surveyed were also younger on average than Whites.

Trust, Knowledge and Exposure: Overcoming the Barriers

Last year's survey found lack of trust in financial advisors as a key barrier to investing among African Americans. This year's survey showed that lack of trust is less of a barrier for Black women, with just 41% agreeing that stockbrokers and financial advisors are "more interested in making money for themselves than in giving good advice," compared to 57% of Black males. Interestingly, both Blacks and Whites chose Oprah Winfrey as a more credible source on investment information than Bill Clinton, Colin Powell, Dan Rather or Michael Jordan.

The survey shows, nevertheless, that Blacks will still have to overcome a strong perception that stock investing is really just a roll of the dice. According to the survey, 56% of Blacks agreed that investing in stocks is "just like gambling" compared to just 35% of Whites. Again, however, Black women are less likely than Black men to agree (53% vs. 60%).

A knowledge gap also exists among Blacks -- and especially Black women -- with almost two-thirds of African American non-investors saying that lack of "knowledge" is the reason why they do not invest. Almost half of Black Women (47%) describe themselves as beginners in terms of investment experience, compared to 40% of White women. Just 9% of Blacks know the average historical rate of return for the stock market, compared to 18% of Whites. And Blacks are also more than twice as likely as Whites (24% to 10%) to pull money out of the stock market in the event of a downturn.

Lack of exposure to saving and investing also contributes to the relative under-investment of Blacks compared to Whites. The survey found that just 36% of Blacks opened a bank account before high school, versus 54% of Whites; barely half as many Blacks (24%) as Whites (46%) grew up in a home with stocks; and just 43% of African Americans have a will, compared to 61% of Whites.

According to Mellody Hobson, Senior Vice President, Ariel Mutual Funds, "The barriers to investing are very real, but there is also a clear message from the poll: the Blacks community is ready to take a giant step forward into the world of investing -- and this is even more true of Black women. The challenge for investment companies is to understand these barriers and help eliminate them."

Michael DeFlorimonte, Vice President in charge of Schwab's African American Marketing Initiative, added, "The financial services industry won't reach the African American investor through traditional marketing methods alone. In order to overcome this culture of conservatism, we must continue to build long-term relationships with institutions Blacks know and trust -- and there is no short cut to building trust nor substitute for time and commitment."

Ariel and Schwab collaborate on several nationwide investor education and marketing initiatives in association with the Coalition of Black Investors (COBI), the African American Women on Tour conference series and other Black professional organizations. They have also launched joint marketing campaigns in key cities, including Atlanta, New York and Washington D.C.

Separately, Ariel's non-profit arm, the Ariel Education Initiative, funds an elementary school in a predominantly Black inner city Chicago neighborhood where investing is a key component of the curriculum. Schwab's nationwide efforts include an ongoing focus on recruiting African Americans, and through The Charles Schwab Corporation Foundation, the funding of numerous community-based educational programs. The firm is currently upgrading 3,000 computers that will be donated to K-12 public schools across the country.

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 Website is Charles Schwab & Co., Inc. (member SIPC/NYSE), is one of the nation's largest financial services firms serving 5.9 million active accounts with $542 billion in customer assets. The Charles Schwab Web Site(TM) can be reached at www.schwab.com.