America’s fastest-growing demographic is still expanding at an unprecedented pace. Yet as America's 52 million-strong Hispanic population explodes – projected to increase by more than 150% by this century’s midpoint – and accumulates more wealth, it's become clear that the unique financial needs of this community are not being adequately met.
According to a study by Prudential Financial, Inc. (PRU), financial advisors must do more to reach out to the United States’ diverse Hispanic population to bridge long-held cultural misunderstandings about how this group typically approaches finances.
Research has found that Hispanics are one of the country’s hardest-working demographics. According to a recent survey of self-identified Hispanic Americans, the majority expect to stay in the workforce on at least a part-time basis even past the typical retirement age of 65. That's exceeds the expectations of the average American. Also, Hispanic labor force participation is almost 66%, again outpacing the general populations; 62.8%. (Click here for more U.S. Census Bureau information on the Hispanic demographic.)
Despite a cultural trend toward greater participation and longevity in the workforce, the Prudential survey indicated that Hispanics often forego retirement savings in lieu of current family financial demands, from college savings to elder care. Aside from seeing retirement accounts as relatively low priority, a fifth of respondents did not participate in other typical savings programs, including savings accounts, life insurance and mutual funds. And more than a third of survey respondents said that sending money to family abroad was a part of their typical expenditures. Those familial obligations, as well as lower average earnings for the demographic, mean that many Hispanics find it harder to save for retirement. But that won't be the case forever.
Trust Comes First
Many financial advisors believe that their lack of success in seeking out Hispanic or Latino clients is based on such clients putting Hispanic heritage or Spanish-language skills at the top of their lists when it comes to seeking financial advice. While knowing a bit about the Hispanic community's needs and speaking Spanish will never hurt, it's a misperception that those skills are of primary importance. What remains imperative to these clients is a shared understanding of values, along with a sense of trust.
Advisers keen to reach out to the Hispanic community should educate themselves on the cultural values and the inherent financial strengths of this demographic. By actively making inroads in the community, through volunteering, board participation and maintaining a presence at neighborhood, cultural and business events, financial advisors will be far more likely to develop meaningful working relationships. While it’s common for many clients to act on financial services recommendations from within their communities, recent and first-generation immigrants may be even more likely to rely on local networks for important resources. As with any tight-knit group, word of mouth travels fast.
Advisors should also do their research and develop an awareness of the financial fears of the Hispanic demographic. Recent statistics released by Prudential indicate that Hispanics see debt in a more negative light compared to other Americans. Understanding that debt-aversion may stem from high interest rates in Latin America will be key to working with clients to adopt a more flexible attitude to finance and investing.
The Bottom Line:
The growing Hispanic demographic remains a largely untapped opportunity within the financial advisory services sector. By exercising a culturally aware and community-focused approach, financial advisors may have the opportunity to work with a group of clients that stand to benefit tremendously from a proactive approach to saving and investments.