Courting the Asian-American financial advice market

They have higher incomes and more assets than the general population, but fewer than one in five Asian-Americans has a financial adviser

Oct 16, 2016 @ 12:01 am

By Richard Stolz

By many measures, Asian-Americans are a financial adviser's dream. They earn more than the general population, they have more financial assets and they are excellent savers.

“You don't need to tell Asians to save,” said Marguerita Cheng, CEO of Blue Ocean Global Wealth in Rockville, Md. “My father [a Chinese immigrant] started saving for my college education before I was born.”

Asian-Americans make up a fast-growing segment of the United States. In 2014, they represented 6.6% of the population, up from 4.5% in 2000, Census Bureau data show. During that time, their buying power grew 180% — faster than for any other ethnic segment in the country, according to a recent report from Prudential.

That report included results of a survey of nearly 2,100 self-identified Asian-Americans and 500 non-Asians that point to a number of factors that make Asian-Americans good prospects for advisers:

Median Asian-American household income is $87,000 versus $62,000 for the general population.

Average estimated household financial assets of Asian-Americans total $445,600, or 16% higher than the general population.

Sixty-two percent of the Asian-Americans surveyed were college-educated (including many with advanced degrees), versus 40% of non-Asians.

Geographic concentration of Asian-Americans
Median household income by region
Source: Prudential Research


The report also indicated that the Asian-American market might be a ripe opportunity for advisers. Just 18% work with an adviser, compared with 26% of the general population. Despite this low proportion, 43% of Asian-Americans say they are willing to consider working with an adviser.

The good news, at least for non-Asian advisers, is that you don't have to have Asian ancestry to make inroads with this population.

“A lot of advisers think Asians only want to do business with other Asians,” Ms. Cheng said. While that is often true with respect to first-generation immigrants, “sometimes being non-Asian can be an advantage because some Asians in close-knit communities worry about gossip,” she said. They might be less concerned about the prospect of sensitive personal financial information leaking out into their community if their adviser is non-Asian.

Asian-Americans, like the general population, rank retirement-related goals as their top financial priority. Where they differ is their willingness to devote substantial resources to help family. For example, 22% in the survey say providing college tuition for their children is highly important to them versus 14% of parents in the general population. A third of the Asian-Americans surveyed also identified themselves as caregivers for another person — a spouse, parent, other relative or special-needs child — compared with 21% of the general population.

(Related read: Game Changer: A Diversity Problem)

But one of the first things to realize about this market is that it is not monolithic. According to the Prudential report, the national-origin distribution of Asian-Americans breaks down as follows: Chinese, 20%; Indian, 18%; Filipino, 16%; Vietnamese, 11%; Korean, 9%; Hawaiian/Pacific Islander, 6%; Japanese, 5%; other Asian, 16%. Multiple cultures and languages often distinguish populations even within each country of origin.

Language, however, might be an overblown concern. The Prudential survey indicated that English is spoken “mostly” in 27% of households, exclusively in 29%, and English plus another language equally in 30% of the homes, leaving only 14% in which no English is spoken.

More than a third of Asian-Americans say they could maintain their current lifestyle for a year or more if their household lost all of its regular monthly income.

While 43% of the general population says reducing personal debt is a top priority, only 35% of Asian-Americans share that concern.

More important than language concerns is the prospect that advisers may encounter distrust from some Asian-Americans. For example, 21% in the survey cited the statement “I have never found one I can trust” as their reason for not using a financial professional, compared with 13% of the general population.

If an adviser is going to successfully attract Asian-American clients, he or she would have to build trust on a foundation of respect.

“It's got to be something that comes from within,” said Hurong Lou, a manager of financial services for Prudential's regional office in Marlton, N.J.

When interacting with people from another culture, “you have to be observant, know your surroundings, particularly when you come to people's homes,” he said. For example, if shoes are left at the front door, an adviser should take note and follow suit.

“When I meet with prospects, it's a conversation, it's fact-finding, it's about how I can be a resource,” Mr. Hurong said. “You need to get to know them personally, and that's a gradual process.”


Fueling distrust for many Chinese immigrants is their experience living through China's traumatic Cultural Revolution. Many had their assets confiscated by the government and, as a result, are conservative with their investments. They also prefer to maintain as much personal control as possible, said Rose Swanger, a native of Beijing who came to the U.S. for her education and remained.

“Many Asian investors obtain financial advice through the grapevine, such as family and friends, regardless of whether the advice is right or wrong,” said Ms. Swanger, whose firm, Advise Finance, serves a diverse clientele in Knoxville, Tenn.

Such historical experiences also made many more people of Asian descent inclined to invest in tangible assets such as real estate and gold, she said.

Gold is a cherished investment in India. Many Indian immigrants maintain that preference, along with real estate, according to Neil Krishnaswamy, an Oklahoma City-based adviser whose parents are Indian immigrants.

(Related read: Investing in India is gaining appeal with advisers)

Whatever the merits of real estate and gold, a high concentration of a prospective client's wealth in those asset categories doesn't follow the tenets of diversification, and leaves less for advisers dealing in securities to work with. Thus, a retainer-based compensation arrangement might be more fitting than one based on assets under management, Mr. Krishnaswamy said.


It is also important to assess how well the prospect understands the role of advisers and their capabilities. If an Asian immigrant comes from a country where investment advisers and financial planners are scarce or nonexistent, there is little reason for them to know what to expect, according to Srinivas Reddy, a senior vice president in Prudential's retirement services division.

In India, he noted, chartered accountants are the primary type of adviser for wealthier people, yet their function and skills have little in common with an American investment adviser or financial planner. Therefore, the job of educating Asian prospects about the range of services one offers, often starting from scratch, is critical, Mr. Reddy said.

Given the strong cultural family orientation, it is also crucial to frame discussions of the advantages of various alternative financial strategies in terms of their benefits to the entire family, not just the parents. What might sound like a linguistic nuance to an adviser who fails to appreciate that consideration could have far greater significance to an Asian prospect or client.

(Related read: Why aren't there more women fund managers?)

“To an Asian family, a college education is viewed as an investment, not an expense,” Ms. Cheng said.

There's a lot of talk about client segmentation, about limiting the amount of time you spend on your 'C' clients. That's not going to work here. —Chris Chen, an adviser in Waltham, MassGetting that first meeting with an Asian-American prospect might take several attempts. Marketing through specialized media outlets that cater to particular immigrant groups is one way to get started. After an initial success, relying on the power of referrals is especially appropriate in building an Asian-American clientele, Mr. Reddy said.

“Don't be afraid to ask for one,” he said.

It's also important to be patient in building the scope of a relationship, even after striking up an initial client connection.

“There's a lot of talk about client segmentation, about limiting the amount of time you spend on your 'C' clients,” said Chris Chen, an adviser in Waltham, Mass. “That's not going to work here.

“But once you get over the barrier of trust, [Asians] tend to be loyal for a long time,” he said.

Richard Stolz is a freelance writer.


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