Vallejo makes case that advisors shouldn't ignore the Hispanic market of investors

When Jody Agius Vallejo finished giving her speech yesterday at the TD Ameritrade Elite Advisor Summit about how to market financial advisory services to the Hispanic market, she came face to face with Frank Armstrong.

The president of Investor Solutions wanted the associate professor of sociology at USC and a corporate speaker to know just how difficult it is for a financial advisor to win assets from Hispanic investors.

Despite being in the business for 30 years in Coconut Grove, Fla. – a suburb of Miami where more than half the population is Hispanic, he has had virtually no success. He added that it has made no difference to have hired several Hispanics onto his staff – including a handful of them with MBAs. “It’s just affinity marketing,” he says. “I have Hispanic friends but they just don’t come to me.”

Vallejo told Armstrong that the Miami area may be exceptionally difficult because of the dominance of the Cuban population. Not all Hispanics act in a uniform fashion.

Money to needy relatives

Vallejo also fielded a question during the Q&A session from another advisor who had some affluent Hispanics as clients but little success in advising them. The problem: they simply never execute the plan that gets set out. Instead of putting cash aside, they are constantly sending money to needy relatives or helping to bail out a friend with their business.

Vallejo agreed that this is a common issue among Hispanics and a response to the economic circumstances of the ethnic group. She suggested perhaps incorporating the predictable need to be generous into the plan – earmarking certain assets for that purpose.

Yet she allowed that few Latinos have experience with holding investments. Most of them have their wealth in their home and life insurance.

Surpassed African-Americans in 2005

Challenges aside, Vallejo made her case for why RIAs – virtually all white in the room with a couple of exceptions. After whites –who represent 66% of the U.S. population, Hispanics are the second most prevalent group with 15%. They surpassed the population of African-Americans in 2005, she says.

The majority of the Hispanics in the U.S. were born here — with only 38% foreign born. The Hispanics who have enough cash to be good candidates for financial advice speak good English so it is not necessary to have a second set of written materials translated into Spanish. “[Second and third] generation] Latinos overwhelmingly prefer to speak English,” she says.

Latinos are rapidly populating parts of the country where few have lived before. Georgia and South Carolina are at the forefront of that growth. Thirty percent of Hispanics intermarry and 90% of the spouses are white.

Hispanic people own three million businesses in the United States with $465 billion of revenues. There has been a 126% increase in the number of Latinos making more than $100,000 in the last decade. To prove her point about how many of this ethnic grouping is wealthy, she asked people in the crowd to raise their hand if they knew a wealthy Hispanic person. The vast majority of the hands shot up.

Fertile networking

Vallejo says it does not necessarily have to be difficult for non-Hispanic advisors to meet affluent Latinos. Hispanic businessmen are two times more likely than whites to form associations, locally and nationally. She suggested possibly joining the National Hispanic Chamber of Commerce and the National Hispanic Entrepreneur’s Organization.

And it’s an idea that already has shown success in the financial advisory industry.

“Merrill Lynch is one of the major sponsors of [Hispanic business] events,” she says. “They’ve made a major effort to reach out to this population.”

Armstrong agrees that there are a handful of big organizations that connect with Latinos to the detriment of RIAs – mentioning the brand loyalty he sees to Chase Bank and Merrill Lynch.

“They certainly do get a disproportionate share of the business,” he says. “They have brand preferences because they go back [in time in marketing to and serving Latinos].”

Here are some images from day one and day two of the Elite Summit as provided by TD Ameritrade: