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How to connect with the fastest-growing client demographic

Jan 22, 2014 @ 1:13 pm

By Carl O'Donnell

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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?”

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