8 key steps to providing better advice to Latino clients
Get Morningstar’s essential reading for finance professionals in Advisor Digest. Editor’s Note: A Quick Point on Terminology: While we’re using Latino in this article, you might have clients who identify as Hispanic or Latinx. If this is relevant to a conversation, it’s worth asking them if they have a preference.
Jokingly, I tell my clients that I started my career in financial planning at the age of 8.
My mother was the last of nine children in a family of 10 to be issued a visa to leave Colombia and come to the United States in 1983. She came to the United States as a single mother of three children – me – even and my two older brothers.
I quickly learned English and became the check writer and translator, before there was “Press 2 for EspaÃ±ol”. To help my mom, I called the utility companies and anyone else who didn’t speak Spanish. I experienced the anguish and frustration that came with learning a new language and new systems as well as a lack of funds.
After a mid-career stint in the financial planning industry, what surprised me most was the limited way financial planning has worked outside of the high net worth realm. There was little connection between the bases – taxes, investments, estate planning, etc. – and the information that goes with listening to the human side in the equation.
Then when you consider what is offered to the Latin American community by Spanish speaking financial advisers, the options are extremely limited. According to the Certified Financial Planner Board, in 2017, less than 3.5% of certified financial planners were black or Latino. And yet, these demographics, along with other non-whites, are expected to represent the majority of the U.S. population by 2045, according to the U.S. Bureau of Labor Statistics.
As other advisors have pointed out in this series, opening your business to a more diverse customer base (not to mention employees) starts with education.
Here are some areas to understand and explore to help you better serve Latino customers.
1) Spanish-speaking cultures are not all the same
There are great differences in history and culture across the Spanish speaking world. Clients from Cuba, Mexico, Colombia, and Argentina all bring different economic, social, and cultural stories to your office. Do your research and learn more about the commonalities and differences between the political and financial systems, as well as the social aspects of their lives, such as greetings or even their food.
2) Your Latino Client Might Have Had More Education and Wealth Than You Think
My grandparents, who left Colombia many years before my mother, were considered middle class and continued their jewelry business when they arrived in New York, while running a small grocery store. It is common for people not to be able to continue their previous profession immediately. You can find wealthy doctors, dentists, and engineers in less desirable jobs until they can get their transcripts translated and re-take licensing exams in the United States to further their calling. Additionally, they may have more assets in their home country, such as a pension which may or may not be allowed to be transferred to the United States, but which can significantly shape their retirement income needs.
I encourage US-born advisors to ask questions about assets in the US and overseas. I have two clients with overseas homes and businesses, and they plan to sell and then invest the product in the United States. An advisor can add significant value by helping them navigate tax regimes, estate planning, and international pension plans. If a prospect calls and has an accent and isn’t familiar with the American system, don’t turn them away.
3) Latino customers may lack confidence in our systems and markets
If your clients come from a country where the banking system has failed and their savings disappeared overnight, the experience of going from wealth to rags can be absolutely devastating and leave a lasting impact. Confidence in the rule of law and financial stability are not easy.
I learned a lot from an Argentinian who lost cash during the Great Depression of 1998-2002, so when shocks hit a client’s wallet, I have to be sensitive to them. I have another client who is willing to pay us a large amount for financial planning but does not want us to manage their portfolio for fear that the funds will lose money. Another wants to distribute assets and how they are held across multiple countries.
It can also manifest itself in other ways. Cubans may be more hesitant to depend on Social Security and other safety nets built into the American system because they see them as communism or socialism. Instead, they may think they should be responsible for building their own wealth by starting a small business before creating retirement savings that could be wiped out – as they were in their home country when communism has taken over.
With all of these customers, we need to work on educating them over time on our system backups to build their trust.
4) Real estate could be very important …
Owning real estate is more important than you might think if you don’t ask the right questions. It represents financial security and safety. For some, this means that no one can make you homeless again. For others, real estate is the best ROI you can get when you can’t trust your own government, your banking system, your currency, or double-digit inflation. In other words, it means both emotional and physical security. Clients may find it difficult to invest savings in the markets rather than putting everything in real estate.
5)â¦ but mortgage debt can be scary
When you combine a story in your client’s home country that leads to nervousness about the stability of financial systems with the importance of having a home, there may be a reluctance to hold mortgage debt even though it does. is in their long-term financial interest. .
Showing the difference between investing money to pay off a house and investing in tax-deferred or taxable accounts, coupled with tax savings, recently changed a client’s opinion on buying a home. ‘a million dollar house instead of using a mortgage as leverage to build cash wealth.
6) Paying for college can be all they know
I find that many Latino clients do not understand college savings options and the availability of federal financial aid. When I decided to go to college, my brother funded my first semester. I borrowed about $ 400 and went to college. After I registered, I found out about college funding. You mean there are other ways to fund school besides asking my brother for money? Who knew? Obviously I didn’t, and many other immigrants may not know it either. A client once considered cashing out 100% of a Roth IRA – a large chunk of his retirement assets – to pay for a child’s education. In the end, the client opted for student loans with the strategy of pursuing loan reduction strategies after graduation.
Taking the time to explain how colleges can be funded, prepaid savings plans, and the benefits of 529 plans without simply suggesting that clients research these options will go a long way in helping them make better financial decisions.
7) Saving for retirement is a new concept
The older generation says, âRetirement savings? What is that? My children will take care of me â. Both generations accept this as the norm. Family comes first and they will take care of each other. If your clients are fortunate enough to have benefited from their parents’ sacrifices, they will feel gratitude and an obligation to support them. It is a budget item that must be respected.
I had a recent conversation with a prospect who felt comfortable enough to tell me that he and his wife had funded an extension built at his in-laws so they could live there to support his beautiful. -mother now that her husband has passed away. . He told me over and over again that he knew he was a little behind in his own retirement planning, but family comes first and his own plan is a second priority. As we moved forward with his retirement projection, I needed to factor this into his plan while making sure he was comfortable with the income he could earn from his investments to support himself and others. of his extended family. I have another client who was planning to live with his wife in a small condo tells me that now that her father and her husband’s father have passed away, they are planning to buy a bigger home to accommodate their two moms and become their primary keepers.
Working longer when needed to take care of your family is a top priority. Talking about sending parents to a nursing home without understanding that would be almost insulting.
8) Be on the lookout for patriarchal society
This is a delicate question. Many Latin cultures are patriarchal. Not all Latino couples will be that way, but couples from all cultures have one person who is more the âfinancial managerâ of the family than the other. This may not be comfortable for you, especially if you are a female counselor. This goes against current trends. But remember that even if you are from the United States, your grandparents were probably that way. Latinos can change over time, as we all do when we are part of a new culture, but we have to come to terms with where many are today.
The American path is not the only path to financial security. It is always important to listen and not to make assumptions in our roles as financial advisers, and especially in the Latin American community. Take the time to ask questions and understand their goals and values, before making recommendations. Be a safe place for your client to trust you by setting clear goals, identifying obstacles, and honoring their fears. In other words, ask more questions and make fewer assumptions.
Catalina Franco-Cicero joined Tobias Financial Advisors in October 2017 as a financial advisor. In this role, his responsibilities include managing client relationships, designing financial plans and advising on pension plans – 401 (k) s – for small businesses and the delivery of education programs on retirement. financial well-being to their employees. Additionally, she also works with Spanish speaking clients and serves as a mentor for the next generation of team advisors. Franco-Cicero made a career in the financial services industry in 2011. Prior to changing careers, she was a wellness professional and adjunct professor at Barry University. The opinions expressed in this article do not necessarily reflect the views of Morningstar