As a child, I always rooted against basketball legend Earvin “Magic” Johnson. His Los Angeles Lakers were arch-enemies of my hometown Boston Celtics. I love what he has achieved since retiring from basketball, though.
His Magic Johnson Enterprises company, which invests in and strengthens under-served urban communities, recently bought a controlling stake (60 percent) in EquiTrust Life Insurance Co., creating the largest black-owned insurance company in America, according to L.A. Biz.
Johnson’s tweet following the acquisition of the Chicago-based distributor of fixed-rate and indexed annuities and life insurance captures the importance of the transaction:
…the largest acquisition by a minority-owned business of a financial services firm in history. #EquiTrust
— Earvin Magic Johnson (@MagicJohnson) June 23, 2015
Magic Johnson is looking to make a splash in the insurance market.
EquiTrust manages $14.5 billion and has more than 23,000 agents. Following the announcement, Johnson emphasized his intention to continue helping urban communities.
“EquiTrust provides MJE a tremendous platform to advocate for financial literacy and assist in creating job opportunities at every level. We will educate and emphasize the importance of life insurance for estate planning and annuities for retirement planning purposes,” he said. “It’s not only groundbreaking, but continues my mission to invest in businesses where we can make a positive impact in the community.”
Research shows minorities are under-represented in the retirement planning market, presenting insurers with an opportunity. A Prudential study in 2013 found that only half of African Americans have a workplace retirement plan, such as a 401(k). The Urban Institute, a non-partisan American think tank, found an alarming disparity between white families and minority families, according to The New Republic.
The median white family has just $5,000 in liquid retirement savings, up from $1,500 in 1998. For African-American and Hispanic families, the median is zero.
Some organizations are already working hard to close this social gap. MassMutual has a webpage dedicated to African Americans: “We take an active role in the communities we serve, because it helps us understand your needs better.”
And New York Life has a webpage for “Making a difference in the African American community” via life insurance and retirement income products. It will be interesting to see what will happen next with EquiTrust and other financial services companies. In the meantime, I’m wondering how State Farm’s Chris Paul feels about a former point guard invading his turf…