Desiderio says fraud extends to other financial services. “Even with tax preparation, very few people serve the tribal community,” Desiderio says. “Few people guarantee loans, there has been a big effort to mitigate that. There’s just not big competition. Without that, there’s a tendency for people to come in without the best intentions.”

Jones says that some Native Americans distrust the financial services industry because of past behavior. “In many cases, financial organizations don’t offer a fair bill of goods to these clients,” Jones says. “Several years ago, a large company had set up a plan for a tribe I work with, but never followed-through to allocate and diversify the investments. The tribe ended up in a money market fund for 10 years and made no money.

“The Hopi litigated a similar issue,” Jones says. “They asked for long-term, low-risk investments, but the advisors opened up margin accounts and invested in hedge funds. This happens because of a mishandling of funds and a lack of transparency, but it’s also because tribes don’t ask the right questions and monitor their investments.”

The vulnerabilities aren’t limited to Native Americans, Dewees says. “Low levels of financial literacy are common; most people are not very good at managing their money,” Dewees says. “It’s exacerbated in Indian country because there’s a lack of access.”

The Native American Finance Officers Association hopes focusing on better financial stewardship among tribal government leads to better literacy among tribe members, Desiderio says.

“If leaders value that skill set and take it on themselves to be financially responsible, it trickles down,” Desiderio says. “If they see the problems in their tribe and make financial literacy important on a tribal level, they in turn will make sure that individual citizens have access to financial literacy programs.”

Tribal governments, often at the recommendation of advisors, are attaching conditions to their disbursement plans and the “18 money” that comes from minor trusts. “We set up a longer distribution plan: At 18, members can start to take 10% of their disbursements per year,” Jones says. “At 29, whatever is left is distributed to the recipient.” In some cases, the disbursements can only be released to pay for education expenses until the recipients reach a certain age.

But the demand for services at the family level still presents an opportunity for enterprising advisors. “I think there’s a strong, untapped demand for professional financial services,” Armstrong says. “People have a desire for advice, but aren’t necessarily directly articulating it.

Dewees encourages financial advisors to reach out to tribal councils. “I would also encourage advisors to find financial education resources that resonate with young people,” Dewees says. “I would make a case for why they have cultural sensitivity to the unique issues faced by native peoples. It is an opportunity because financial markets are confusing and people need assistance managing these resources. There are tribal governments open to working on these issues with advisors.”

In some cases, the intersection between Western and tribal cultures can be difficult for outside advisors to navigate. “Most financial literacy programs don’t fit with the values of the tribal community,” Desiderio says. “If you make the programs culturally appropriate, more people might take to them. In tribes, the financial need is less important than community need. We want to help everybody out, the factor of wealth or lack of wealth is less important for us.”

With that should come an understanding that most native cultures are focused on a more distant future than advisors are accustomed to. “Are your products investing for the next seven generations? How does our concern for both the elderly and for future generations fit in with Wall Street?” Desiderio says. “Our time lines are different, they may be leaving out investments or suitability factors, or failing to consider our different risk tolerances. We are not as interested in making sacrifices for rapid growth and larger returns.”

Advisors like Jones have seized on the opportunity, and firms like Bank of America and Wells Fargo already have native-oriented practices, but demand for services remains high, Desiderio says.

“It’s becoming a trend for financial institutions to be more in tune with the needs of tribal governments,” Desiderio says. “It’s an opportunity for advisors to try to understand the tribal needs. It is an interesting and rewarding path, but you have to understand the community. Just coming in and thinking that because you are there, you’re going to get business is a fallacy.

 

First « 1 2 » Next