Recently we talked with Bob Friedman about the early days of the asset building movement and how this work attracted funders. Here, in our second article based on that conversation, we hear his thoughts on where the movement is today and where it may be going.
The asset building field is in flux, Friedman says, and the overall trajectory is upward. New foundations have been coming on board, including local players like the Silicon Valley Community Foundation (as we've reported here) and the Northwest Area Foundation (which is spreading asset building to the Northwest); and national foundations like Kellogg (which is taking a leading role in advancing child savings accounts), Kresge, Cargill, and others. Major financial institutions including JP Morgan Chase and Prudential are backing asset work, too.
Friedman also notes how many new initiatives are gaining momentum. "IDA programs have given way to a whole spectrum of approaches spanning the Learn, Earn, Save, Invest, Protect spectrum." He sees government child college savings accounts as adding an important component to the asset building mix.
The field is also gaining momentum legislatively in many states, which are passing a wide array of asset building policies as tracked by the Assets and Opportunity Scorecard. "We now have an Assets and Opportunity Network comprised of more than 75 state and local coalitions with more than 1800 organizational and individual members spanning the country."
Friedman is particularly proud that the group he started, the Corporation for Enterprise Development (CFED), has never been stronger. It has backing from over 40 institutional funders, including a who's who of major foundation and banks. In fact, if you're wondering where the asset building movement is getting its money, CFED's list of funders offers a pretty good snapshot of which funders are in this game right now.
Friedman cites last year’s Assets Learning Conference as a powerful indication of just how much the movement has grown and matured. The event attracted 1,200 practitioners, policymakers, financial institutions, foundations and academics, with long-time veterans in the field mixing with a growing cohort of newcomers. The conference opened with an address by Federal Reserve Chair Janet Yellen, which gives you a sense of just how much mojo the asset world has right now. And the movement's determination to change policy was on display when, in the middle of the conference, 400 participants visited over 200 offices on Capitol Hill to talk about the need for asset tax policy reform.
The rising salience of the inequality issue is one factor putting wind in the sails of asset building, says Friedman. There's keen interest in addressing that challenge, including the specific problem of wealth inequality (which is much greater than income inequality). There's a realization, says Friedman, that we can't address a "lack of economic opportunity and mobility without addressing gaping wealth inequality as asset-building reforms promise."
Right this moment, what Friedman sees trending is an effort by foundations and nonprofits to join forces to push for reforms in tax policy to foster asset building among those Americans who need the most help in this area. Currently, the lion's share of benefits for the major tax deductions that help create wealth—breaks for home mortgage interest, retirement savings, and capital gains—flow mainly to more affluent Americans. CFED says on its website:
On average, households earning more than $1 million per year receive more than $95,000 in tax benefits that reward savings and asset-building behavior, while someone earning $50,000 gets an average of $50.
That's a pretty shocking statistic, and it explains why the asset building movement has been zeroing in on tax policy. Friedman says: "It's taken us a long time, but I think there is a new focus on the tax structure driven by the realization that that’s where the money is and that this is basically how we incent asset building in this country."
Tax policy currently helps to "drive wealth inequality," Friedman says, while it could work to shrink such gaps if reforms are made.
Of course, some of the most powerful interests in Washington have a big stake in preserving the status quo, with current tax breaks helping fuel the housing and finance sectors. Change won't happen without a major fight.
Friedman sees a handful of foundations—Ford, Levi Strauss, Walter and Elise Haas, Sr., Annie E. Casey, now Kresge—as leaders among foundations helping move the tax issue to the next level. "It takes some guts, it's a big policy, it's controversial."
In another important advance, Friedman sees some old silos breaking down. "The civil rights organizations are focusing on economic justice now in a way that's new and important," while the asset building field is focusing on the racial wealth gap "in a way we haven't and I think in part because we're able to offer solutions rather than just a critique."
You can see how that growing collaboration would appeal to funders, who are always looking for ways to bring together the disparate groups they fund in common cause.
Crucially, the asset building movement also has appeal outside the usual circle of liberal foundations because its critique of poverty resonates with centrists and conservatives who see traditional safety net programs as a dead end or, worse, a trap. Friedman says that while he's totally supportive of the safety net,
The fact is that it mitigates the pain, but it doesn't really offer a way out, and on the edges it actually penalizes people for doing all the things they need to do to move forward, you lose benefits if you save, work, go to college, invest, plan for the future, etc, so I think the job of the 21st century is to build the ladder.
In an ideal world, safety net programs would work in tandem with asset building strategies, addressing short term needs while also fostering long-term wealth creation. Friedman says there's a lot of thinking right now about how to make that happen and government agencies are getting behind this idea. "Government at all levels is integrating asset building into social service, housing, and other programs."
Other innovations are also underway, like new efforts to help young people build college savings accounts early on with the help of donors.
For example, CFED runs something called the 1:1 Fund, which uses an online portal "to make it easy for donors, large and small, to help kids save for college by matching their contributions in children’s savings accounts (CSAs)." The research behind this idea is persuasive, Friedman says:
Kids with a college savings account in their own name are three times more likely to attend and four times more likely to finish college than kids without accounts, even with as little as $500 in the account. Basically, if you expect that you are going to go to college, you'll go to college. You find a way.
Directly helping kids plan for the future is appealing to many individual donors, and Friedman sees growth in the number of funders drawn to asset building, in contrast to the foundations that have traditionally backed this field.
There are people out there like Harold Alfond who devoted a whole foundation to $500 for every child, and the state of Maine will match savings contributions. All of a sudden you're getting enrollment of a whole generation of kids.
To Friedman, the overall picture is of an asset building movement that's finally come of age, pushing a range of new approaches with the support of new funders. As well, there are "more younger, smarter, more diverse people leading this field."
"I hear more and more talk about a tipping point," Friedman says.
This point hasn't come quickly, if you consider that Friedman founded CFED in 1978. But it's hard to deny that, after a long and hard slog, the asset building's moment has finally arrived.