They’re fastest-growing ethnic group in the U.S., one that’s increasingly educated and upwardly mobile. As such, Latinos make for a desirable, potentially lucrative client base for registered investment advisors (RIAs).
Problem is many advisors don’t know where to start in terms of cultivating relationships with prospective Latino clients. Unfortunately, some advisors don’t want to because they’re fee-based model encourage focusing on high- and ultra-high net worth clients. Those are labels that don’t apply to many Latinos. Yet and “yet” is the operative word here.
That’s good news for the advisors that do want to engage Latinos because the advisors focusing on certain income levels are missing out on long-term growth opportunities. Data confirm Latinos aren’t just an increasingly significant portion of the U.S. population – roughly 18% today, up from 12.5% at the start of this century – they’re accessing traditional wealth-building tools more frequently than ever before.
“Young Latinos are the fastest-growing demographic and many have a greater propensity to access wealth-building enablers, such as post-secondary education, than older generations. Between 2010 and 2019, the Latino population added 10 million people to the total population, 2.2 million of which was solely driven by Latinos under the age of 25,” according to the National Community Reinvestment Coalition (NCRC).
Success with Latino Clients: Avoid These Pitfalls
Often times in life and business, knowing what not to do is as instructive as knowing what to do. That’s relevant when working with Latino clients.
The unfortunate reality is there are still racial problems in the U.S., many of which are born out of stereotypes one group has about another. Point is advisors hoping to establish fruitful, long-term relationships with Latinos had best ditch the pre-conceived notions in advance of the first meeting.
Let’s examine some real world examples. In advance of writing this piece, I reached out to two of my closest friends who are Latino, born and raised in San Antonio. One still lives there and the other lives elsewhere in Texas. I asked them about things they’d want to hear from advisors and issues advisors should avoid in working with clients.
One of my friends recounted a story from his youth. He joined his mother for a meeting with a Merrill Lynch advisor. Long story short, he came away thinking the advisor looked at his mother as a woman with eight kids and a short-term mindset when it comes to investing. Truth is my friend has just one sibling -- a sister. She’s a college graduate and my friend has multiple advanced degrees. Bad move on that Merrill Lynch advisor’s part by embracing ignorant Latino stereotypes.
“Really listening and not making assumptions are always important in our roles as financial advisors, and especially important in the Latino community,” wrote advisor Catalina Franco-Cicero in an article for Morningstar.
Points of Emphasis for RIAs Working with Latino Clients
My other friend brought up a great point and one advisors should adhere to when working with Latino clients: Provide them with the same advice and strategies you would any other clients. For example, if you’re advisor that’s generating positive results for clients with commercial real estate opportunities, involve Latino clients that conversation. Don’t limit the opportunity based on race.
My friend took it a step further, pointing out advisors would be wise to ask Latino clients about what they’re interested in and what concerns them in financial markets. With this demographic, this exercise is highly relevant because, working on the premise that many are first- and second-generation Americans, market volatility in countries like Argentina or nationalization of private industry in Venezuela is still fresh on their minds.
“If your clients come from a country where the banking system has failed and their life savings disappeared overnight, the experience of having gone from riches to rags can be absolutely devastating and leave a lasting impact. Trust in the rule of law and financial stability don't come easily,” adds Franco-Cicero.
Bottom line: Latinos want to work with advisors and there are compelling reasons why advisors should meet that demand. Smart advisors will see the opportunity, ditch the stereotypes, open the door and say “I’m here to help.”