The growing Hispanic population in the United States, and that population’s increasing wealth, would seem to provide a natural source of new clientele for financial professionals.
That isn’t always the case, though, says Carlos Legaspy (www.carloslegaspy.com), owner and CEO of Insight Securities, and the author of Going for Broke: How One Of Latin America’s Largest Financial Frauds Became A Blessing In Disguise.
“We Latinos are frugal, save money to send home, save money for an uncertain future,” Legaspy says. “But the financial industry has overlooked this pool of investable assets, perhaps because there is some inherent bias that Latinos are poor.”
The average Hispanic family’s wealth in 2019 was $165,500, according to the Federal Reserve, which also reported that Hispanic families saw a 65 percent increase in their wealth from 2016 to 2019.
Part of the reason the financial industry fails to notice and adequately serve Latinos could be the lack of diversity in the profession itself, especially on Wall Street, Legaspy says.
A recent Government Accountability Office report showed that white men held 60% of executive or senior-level manager roles at financial-services firms. That compares to 26% for white women, 2% for Latino men, 1% for Latina women, and 1% for Black or African-American men and women.
Those figures aren’t that surprising to Legaspy, who once worked on Wall Street and experienced the lack of diversity and biases firsthand.
“The hostility I faced wasn’t usually overt,” he says. “It took the form of subtle, disparaging, or dismissive comments or attitudes – what we know today as ‘microaggressions,’ though that wasn’t a term in my or most people’s vocabulary back then. But they were no less damaging.”
Possibility For Change
That was long ago, but Legaspy says questions remain about how much the lack of diversity in the field influences the types of clients advisors seek out. Possibly it’s quite a bit, he says, and he suspects that’s because too many advisors don’t realize the true financial profile of the people they are missing out on.
“Many Latinos are small business owners; entrepreneurship is part of the culture,” he says. “From the taco shop, to the gardener to the tiendita or bodega owner.”
Legaspy says that, because of a lack of outreach and education by the financial industry, Latinos primarily invest in real estate or hard assets like coins, or they simply put their money in the bank.
“It is a missed opportunity by both the investors and the financial service provider,” he says.
And therein may lie the possibility for change, Legaspy says. Financial professionals would be more likely to serve minority clients if they can be educated to get past any inherent biases they hold and come to realize the untapped market they are missing out on.
For some that may require more education than for others because ultimately there must be more in a relationship between client and advisor than just the goal of making money, Legaspy says.
Understanding The Investor’s Mindset
When Hispanics do invest, it’s important for financial professionals to understand their approach to investing, and how that might differ from other clients, Legaspy says.
A recent study by JPMorgan Wealth Management found that 57% of Hispanic Americans and 59% of Black Americans prefer to take an active role in selecting the stocks, bonds and funds in their portfolios. In comparison, 46% of white Americans surveyed take an active role in selecting their investments.
The survey also found that Hispanic and Black Americans care more about the social impact of companies they invest in, such as their effect on the environment or whether they are owned or operated by people of color.
“Advisors who make it a point to understand what these investors want, and how they can help them to get there, will be able to make great inroads in broadening their base of clientele,” Legaspy says. “That’s going to create a better situation for everyone involved.”
About Carlos Legaspy
Carlos Legaspy (www.carloslegaspy.com), the author of Going for Broke: How One Of Latin America’s Largest Financial Frauds Became A Blessing In Disguise, is owner and CEO of Insight Securities, a financial firm based in Illinois. He has been securities licensed in the United States since 1991. Legaspy graduated from Monterrey Institute of Technology in Monterrey, Mexico, with a bachelor’s degree in Information Systems in 1989. He is also a Certified Co-leader for Mankind Project International, leading trainings around modern masculinity, emotional intelligence and multi-cultural awareness.