How Advisors Can Work More Effectively with Black, Hispanic Clients

Improving workforce diversity, including in advisory practices, is a topic generating plenty of attention these and one that numerous studies suggest pays dividends. However, registered investment advisors (RIAs) should also consider the benefits of diversifying client bases.

Advisors know that race in the U.S. is, to say the least, a sensitive topic. They should also know that while the bulk of their clients are probably Asian and white, all races, ethnicities and demographic groups need and want financial advice.

However, the unfortunate reality is some advisors aren’t answering the call when it comes to broadening their client bases. They should alter that thinking and simple math explains why that’s the case. In 2020, the combined Black and Hispanic population in the U.S. was 109 million, according to the Census Bureau.

“The Hispanic or Latino population, which includes people of any race, was 62.1 million in 2020. The Hispanic or Latino population grew 23%, while the population that was not of Hispanic or Latino origin grew 4.3% since 2010,” notes the agency.

Advisors Need to Alter Thinking, Old Views

Obviously, the more clients the better for advisors. Broader clients bases should lead to more revenue and increased profitability and all advisors can get behind that. However, there are other compelling reasons to expand Black and Hispanic client bases – not the least of which is the fact that these groups want to be actively involved in the investment planning process.

New research from J.P. Morgan Wealth Management confirms as much. The bank surveyed more than 2,000 Americans to better understand what compels them to invest or stay out of financial markets.

“59% of Black Americans and 57% of Hispanic Americans want to take an active role in selecting the stocks, bonds or funds that make up their investment portfolio, compared to 46% of White Americans,” according to the bank.

Advisors looking to better connect with Black and Hispanic should also realized values-based investing, including environmental, social and governance (ESG), is important to these groups -- more so than other ethnicities.

“Black and Hispanic Americans say it’s important that their investments are Black, Indigenous and People of Color (BIPOC)-owned, started, and/or operated (70% and 46%, compared to 27% of White and 31% of Asian) and have a positive environmental impact (72% for both Black and Hispanic, compared to 55% of White and 57% of Asian),” adds J.P. Morgan Wealth Management.

Advisors working with Black and Hispanic clients and those that want to expand their exposure to these clients should also note these groups favor investment strategies that feature women-owned or female-led companies as well  as though as driving gender and racial equity and diversity.

Broader Themes to Consider

Asian, Black, Hispanic, White or other, there are some issues that don’t cut along racial lines and some of those are appearing in force today, such as inflation and rising interest rates.

“Overall, the majority of investors are concerned about rising inflation and interest rates (88%),” notes J.P. Morgan.

The good news is more than two-thirds of those surveyed – regardless of race – believe they’re equipped to handle a 20% drawdown in their portfolio’s value. Another issue that doesn’t know racial bounds and it’s one that’s relevant to advisors that offer estate planning services is the point that just 23% of women and a mere 17% of men created wills.

Related: How Advisors Can Effectively Communicate with Gen Z