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Do you fit the new Hispanic investor profile?

Hispanic investor profile?

The conclusions of several economic studies on the nation’s 42.7 million Latinos point to an undeniable trend: More Latinos are getting richer, and are cashing in on the American Dream by becoming smart investors.

“It’s not that the war on poverty is over,” said Harry Pachon, president/CEO of the Tomas Rivera Policy Institute, in Contacto Magazine. “But there is a common misconception that all Hispanics in America are undereducated and low-income. The reality is that there is an emerging middle class, and it holds tremendous potential to be a significant market force.

However, as in all other social areas, Latinos bring the influences of Hispanic culture to the investment arena. Although the trend points to Latinos becoming consumers of financial planning and investment services, this industry will find they need to appeal to the cultural nuances of Latino investors.

To help connect the dots of the new Hispanic investor profile, Latino Perspectives called on the expertise of David Fernandez, a financial advisor and founder of Scottsdale-based Wealth Engineering, LLC (www.wealth-engineering.com). Of Cuban ancestry, David also is a member of the National Association of Personal Financial Advisors (www.NAPFA.org).

So what does a composite of the “typical” Latino investor look like?

The puzzle pieces from different sources paint this picture. The typical Hispanic investor:

• Represents a growing economic niche. Census Bureau data show 16.5 percent of Hispanic households fell in the $100,000-plus net worth brackets as of 2000, up from 11.5 percent in 1995.

• Rank among the richest segment of the U.S. Hispanic population. The top 25 percent of U.S. Latinos control 93 percent of this market’s wealth.

• Tend to cluster in five markets: New York, Chicago, L.A., Miami, and Houston. Chicago has the highest population of Hispanics (50.4 percent) in the middle income segment, defined as $35,000 to $99,000. Miami has the highest population (10.1 percent) of upscale Latinos in the $100,000-plus range.
“I would have thought we’d have seen Phoenix on that list,” Fernandez says.

• Has about 7.3 percent of Hispanic investors has his/her wealth in a 401(k) account, and about 7.2 percent in stocks or mutual funds. In comparison, only 2.9 percent of Hispanic wealth, on average, is in an Individual Retirement Account or Keogh plan (for the self-employed).

• Favorite investments are home ownership (47.3 percent of households) and “interest-earning” assets such as a savings account or certificates of deposit (42.4 percent of households).

“The real estate market has done so well, especially here, they have invested in houses and have seen their houses double in value,” says Fernandez. “Now the real estate bubble is on the way down. It’s time to think about diversification.”

• Is a business owner who hires a financial planner to manage the business accounts, then asks for help in planning the owner’s personal investments.

• Start by investing in blue-chip stocks such as Wal-Mart or Microsoft. However, there is a growing sophistication among Hispanic investors, leading them to invest in a balanced portfolio of stocks, mutual funds and interest-earning assets.

• Tend to stick with one strategy rather than chase market trends.

• State goals of preserving and passing on their wealth to the next generation at higher percentages than White investors.

Fernandez offers this advice to existing and would-be Hispanic investors: “Latinos need to seek financial expertise because you are not going to learn it in the educational system. Not just for yourself but to teach your children, too. In our culture it is taboo to talk about money, politics or religion. But you need to start somewhere.”