How to connect with the fastest-growing client demographic

Show respect for values, explain 'good' debt and accept that Hispanics don't put much emphasis on retirement

Jan 22, 2014 @ 1:13 pm

By Carl O'Donnell

+ Zoom

Financial advisers seeking to build relationships with the fastest growing demographic in America just need to reach out and connect with it.

The Hispanic community has a significant unmet need for financial advisory services, has been historically underserved by advisers — thanks to a handful of common misconceptions — and would be very receptive to financial advice if only advisers reached out, according to a study by Prudential Financial Inc.

The Hispanic population is expected to grow 167% by 2050. More so than other groups, Hispanics stand to benefit substantially from financial advisory services. For example, Hispanic households with incomes above $75,000 accumulate only half the assets of others in that income bracket, according to Tanya Valle, vice president of global communications for Prudential, who moderated a webcast on the study results Wednesday. Some reasons for this include saving more than investing, spending on family needs and, for some, lacking knowledge of financial options.

Advisers have generally been hesitant to reach out to this community due to the pervasive perception that Hispanics are only willing to work with advisers who speak Spanish, or who are Hispanic themselves. The truth is that Spanish-speaking clients just want advisers they can trust, and who respect the family values that are strong among Latinos, George Castineras, ‎senior vice president of total retirement solutions at Prudential Financial, said during the webcast Wednesday.

The survey of 1,023 Americans who self-identified as “Hispanic,” demonstrated that members of this group often see retirement savings as a luxury they can't afford and tend to put extra cash first toward meeting the needs of children and elders, and only later toward themselves, Mr. Castineras said. In addition, 40% of respondents surveyed regularly send money to relatives in another country.

“If you just come in and say, 'Focus on saving for retirement,' that value proposition won't resonate,” Mr. Castineras said. “You need to stitch it into the fabric of what's important [to these clients] already.”

Survey respondents expect to retire later than the general population and the African-American community, at 66 or older on average. In addition, 73% expect to work part-time well into retirement, according to the study.

For many Hispanics, saving up for children's education is “almost a religion,” Mr. Castineras said.

Along with making clear that they appreciate Hispanic clients' values, financial advisers should also provide informational and marketing materials in Spanish and avoid jargon at all costs, according to Alexandra Galindez, vice president of women and multicultural marketing at Prudential Financial.

The survey found that Hispanics most often see themselves as savers rather than investors. This self-characterization is often compounded by a lack of basic financial knowledge. Some 20% of respondents didn't own any of the common financial vehicles listed on the survey, including 401(k)s, mutual funds, life insurance and even savings accounts. Some weren't even aware of whether or not their employer offers a matching 401(k) plan, Mr. Castineras said.

Hispanics are also generally more debt-averse than the general population, with 62% saying there is no good debt, the survey found. This is partly a product of the fact that in many Latin American countries, credit is much more expensive than in the U.S. Advisers need to show that some debt — for example, student loans for college — could be a wise choice to take on, said Josie Bacallao, ‎president and chief executive of Hispanic Unity of Florida.

Most importantly, financial advisers need to get themselves out into the community. The survey found that Hispanics are half as likely as comparable peers to have a financial adviser, and also much less likely to have been contacted by one.

“First-generation immigrants get most of their information from community networks,” said Anna Cabral, ‎senior advisor and lead communications principal for external relations at the Inter-American Development Bank. “We need to ask how visible the [financial advisory] industry is in these networks? Are we there where people are looking?”

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Oct 17

Conference

Best Practices Workshop

For the fifth year, InvestmentNews will host the Best Practices Workshop & Awards, bringing together the industry’s top-performing and most influential firms in one room for a full-day. This exclusive workshop and awards program for the... Learn more

Featured video

Events

Perspectives from a NextGen adviser

Male advisers still outnumber female advisers 4 to 1. Allei Holway of AXA talks about why becoming an adviser appealed to her and why more millennials are a good fit for this industry.

Latest news & opinion

Is LPL's deal sweet enough for NPH's 3,200 reps and advisers?

They will have to decide if the signing package they are being offered by LPL makes sense. A lot is hanging in the balance.

Eduardo Repetto to leave Dimensional Fund Advisors

Gerald O'Reilly, currently co-CIO, will take over as co-CEO with David Butler.

Alternative strategies boomed after crisis, but haven't been tested

Because the S&P 500 has outperformed, convincing clients they need protection is a hard sell.

7 ways advisers fixed clients' biggest financial dilemmas

Sometimes it takes creativity, along with knowledge and outside help, to get a client out of a jam.

LPL Financial buys NPH, a broker-dealer network with 3,200 advisers

The deal, part of which is based on the advisers and revenue that eventually will move from NPH, could potentially cost LPL $448 million.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print