Louis Barajas, who runs Louis Barajas Wealth Planning in Santa Fe Springs, Calif., focuses on the Hispanic market. He finds that most Hispanics tend to invest in real estate, rather than traditional retirement plans. "That's a huge issue, and the financial planning industry can help Hispanics not only save money, but also learn how to invest it. But there are not a lot of people reaching out to this community, because there's the illusion that there are not enough people with money."
Barajas chose to leave a more traditional firm 21 years ago to develop a practice serving Hispanics. "The industry needs to understand that even if people in these communities don't make a lot of money right now, they can work with an advisor over the years to change the wealth of a family, the security of a family. My clients are willing to invest in financial planning, because it's a matter of priority for their families."
He also sees a need for younger Hispanics to become advisors, although he finds that new graduates are often unaware that it's even a career choice. "If the industry allows young kids of color to intern at their practices, it would be a huge first step," he says. Career-outreach events at schools would also help, he believes.
Kathy Shultz faces some related issues at her Beaverton, Ore., practice, Shultz Financial Planning, which focuses on recent immigrants and their families. Shultz herself emigrated from China, and understands that people from other cultures often view the path to financial security differently.
"The needs are the same, in terms of planning for retirement or for children's education," she says. "But there are some particular needs that are not addressed, that advisors are not aware of." For example, many new immigrants prefer whole life policies to term life. Although Shultz takes pains to explain that term would be, in many cases, more appropriate, her clients have frequently opted for whole life because they believe the savings component offers more security.
She says education is important to new immigrants, but they face language barriers. She has enjoyed success with Chinese-language seminars, but recommends that English-speaking advisors spend more time in one-on-one meetings with clients who may be relatively new to this country.
Many advisors might also be unfamiliar with cross-border financial planning. Most of Shultz's first-generation clients have assets in their home countries, such as real estate or business investments. "If advisors in this industry want to tap into the minorities market, they need to be prepared to plan across the borders. They will need to learn what investments clients have back home, and why," she says. She points out that the industry is beginning to wake up to this reality, and institutions such as the Financial Planning Standards Board are offering CFP cross-border certification programs.
Randall Eley, president and chief investment officer at the Edgar Lomax Company in Springfield, Va., also sees opportunity for the advisory industry in underserved markets. Eley has been a keynote speaker and conference sponsor for the Association of African American Financial Advisors. He doesn't yet see a big change in asset-management opportunity in minority communities, but believes that will change over time. "Education appears to be more available to Hispanics and African-Americans today than 30 or 40 years ago, so income ought to come behind that," he says. "Saving and investing those funds should come, too. So looking out over the horizon 20 or 30 years from now, I see money following the population." He notes that this is an opinion based on anecdotal observation, not statistical forecasts.
One change he sees already under way pertains to fiduciaries at public-sector and union pension funds, as well as employer-sponsored retirement plans at large corporations. "They serve markets where they have many customers and large streams of revenue coming from minority communities, as well as other communities," he says. "As a part of their public relations and marketing programs, they will tend to look for vendors, including among financial services firms, from those communities. Over the last 20 or 25 years, we have seen some positive developments. Not as rapid growth as some of us would like to see, but trustees are coming to realize that business should not be given to firms that are already the biggest firms."
While it's clear that there is plenty of opportunity ahead for the financial services industry as a result of ongoing demographic shifts, it's equally clear that many practitioners will miss out if they don't change their mind set. As Kathy Shultz says, "Things are changing so much now, but it's not in the comfort zone of many advisors. If they can branch out of their zones and reach new people, it may change the industry."