Recently the media has focused on the significant number of baby boomers approaching retirement. If you're a baby boomer, the financial services industry is demanding that you concentrate on building your nest egg. As a group, this category has been given ample notice, and financial planners are scrambling to get into the business.
However, there is another segment of the population -- over 40 million people and growing -- who also need financial help but haven't gotten the same attention as baby boomers have. And it's not just nest eggs we're talking about: Less than 35 percent of Hispanics have a life insurance policy. In addition, less than 20 percent rely on advice from the financial services sector, yet at least 30 percent are looking to purchase a financial product or engage the services of a financial professional in the next three years.
According to the U.S. Census Bureau, the number of prosperous Hispanic households -- those with incomes of at least $100,000 -- rose 137 percent between 1990 and 2000. But even as Hispanic wealth grows exponentially, their knowledge of the available tools that can help them accumulate future wealth is at a plateau. Educating Hispanics on how to set their financial priorities is an important element in financial success.
Same needs, different attitudes
One key item for financial service professionals to understand is that Hispanics' financial needs are not that different from those of other cultures. People of all ethnicities and races should understand how to create a financial strategy that will help them reach financial goals. And all people will eventually rely on the same tools and techniques that make up the basics of financial planning.
What is often different, however, are the attitudes and experiences Hispanics bring to the topic of investing. Financial planners who reach out to this market must understand the unique needs of Hispanics and advise them on how to overcome many of the hurdles to starting and following a solid financial plan. Here are some of the key differences, based on studies and research:
o Hispanics treasure many doctrines of the American dream; however, the one they typically focus on is self-employment, as shown by the growth of Hispanic-owned businesses. According to the Census, these businesses grew 31 percent between 1997 and 2002, three times as much as the national average. There are more than 1.6 million Hispanic-owned businesses, and many do not have the financial know-how to successfully keep a business running. Hispanics are born entrepreneurs, but they do need financial coaching or training.
o Traditionally, many Hispanics don't have experience investing their money. More than 22 percent of Hispanics do not use banks; many are skeptical of financial institutions because of the political and economic climate of their ancestral homeland, where banks may not have been a safe place to keep their money.
o Hispanics tend to save less. Because of their strong family ties, they are more likely to spend for the needs of immediate family members -- at the expense of sacrificing the opportunity to save for their own futures. Hispanics must learn to weigh their obligations against their own needs.
The language barrier myth
One reason many financial planners don't approach this group is because they think there will be a language barrier. However, new studies show that 21.4 percent of Hispanics in the U.S. speak only English at home, and an additional 37.6 percent feel comfortable conversing in either language. Although many second and third-generation Hispanics will culturally identify with this group, there is great evidence that they are the pioneers of a language shift from Spanish to English. In order to thrive within this market, you don't need to know their language literally but rather understand their needs figuratively.
How to crack the market
The best way to start marketing to Hispanics is by joining local professional chapters such as the National Hispanic Chamber of Commerce, National Society of Hispanic MBAs, or the National Latino Professional Organization. You can also visit local cultural groups such as Mujeres Latinas en Accion, La Raza, and other community leagues and events. You don't have to be of Hispanic heritage to be successful in the market. You must, however, understand and embrace their culture. Ask for corporate help, endorse events, recognize future leaders in the Hispanic community, and let your Hispanic clients and prospects know that you care and you are committed to them.
By the year 2050, it's predicted that 50 percent of the U.S. population will be made up of minorities, and one in four citizens will be of Hispanic heritage. As the population increases, the number of Hispanics entering the U.S. will also increase. As financial planners, we must familiarize ourselves with their personal goals and educate them on how to achieve it.
Jorge Vielledent offers securities and investment advisory services through AXA Advisors and offers annuity and insurance products through AXA Network LLC and its subsidiaries. He can be reached at 915-521-2010 or at jorge.vielledent@axa-advisors.com. Luis Strohmeier is the senior managing partner for Summit Financial Partners, an affiliate of AXA Advisors LLC.
| Different Shades, Different Approaches | |
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Hispanics in this country come from very different backgrounds. Most non-Hispanics believe this is a race, but Hispanics come in different shades - white, Asian, African descent, indigenous, Mestizo, etc. There is a very distinct difference between race and ethnicity. Hispanic is ethnic. In order to address the many concerns of this dynamic society, it is important to understand their cultural backgrounds, values, beliefs, motivation, and history.
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| o | Immigrant Hispanic: Typically transient or non-U.S. citizen who has been in the U.S. for a relatively short time. They do not typically have full command of English and prefer most communication in their native language. |
| o | Assimilated Hispanic: Has been in the U.S. for quite a long time, has adopted the American way in most part, and has a great command of the English language. Normally longtime U.S. residents or citizens who were born elsewhere. |
| o | American Hispanic: Usually a second (or later) generation, and their native language is English. Some of them are bilingual, but most of them prefer English as their primary tongue. They are very educated, earn the most per capita of the three groups, and have a better understanding of the American financial system. |
| Almost all companies that market to Hispanics mainly do so to American Hispanics, leaving the other two groups out in the cold. Don't be fooled - the fastest growth in population comes from the immigrants and assimilated groups, and those are the most under-served Hispanics when it comes to financial advisement. All these groups equally need services such as insurance, banking, lending, savings, etc. | |
| Source: Luis Strohmeier of Summit Financial Partners, an affiliate of AXA Advisors LLC |
