Hispanic Community Is in Dire Need of Retirement Services: Retirement Plan Advisor, October 2009

It's no secret that the Hispanic community in the United States is the fastest growing segment of the population. Yet Hispanics in America are also among the least prepared for retirement, according to a recent report titled "Hispanics and Retirement: Challenges and Opportunities," which was sponsored by the Washington, D.C.-based Insured Retirement Institute (IRI).

Helping this important component of the population get to where others are presents a great opportunity for investment advisors who, according to Arnoldo Mata, director of research at the Hispanic Institute in Washington, D.C., and author of the report, have just not penetrated the Hispanic market as much as they should have. "In general, the bulk of the efforts by both financial advisors and financial institutions has been in serving the retirement needs of the Baby Boomers," Mata says. "They are the ones coming into retirement and they have the biggest savings. But the retirement finance market needs to look further down the road because in 30 or 40 years, Hispanics will be 30% to 40% of the population. Companies need to reach out to these people more."

At a time when individuals are increasingly responsible for their own retirement, there is a tremendous opportunity for advisors to work with the Hispanic community, agrees Cathy Weatherford, CEO of IRI. "Hispanics are a huge population and huge contributors to America's workforce, so they need to have better access to financial literature, tools, and good knowledge to help them secure their own retirement," Weatherford says. "There is a huge opportunity out there for advisors because right now, there just isn't enough focus on the Hispanic community."

Of course, saving for retirement is also an extremely far-fetched, if not completely unrealistic, concept for many Hispanics who are living at or below the poverty line, Mata concedes. But since many of these people have little or no access to employer-sponsored retirement plans and are highly reliant on Social Security benefits for their retirement income, reaching out to them and making them aware of the fact that they need to plan both independently and properly for their retirement is crucial, he says.

More importantly, perhaps, advisors could go a long way in helping the growing number of Hispanics who are actually in a position to save properly for their retirement. According to a 2008 study performed by insurance giant Prudential, middle class Hispanics aged between 25 and 65 and making an annual salary of $35,000 and up represent about 12% of the total Hispanic population. Even so, there are not enough advisors to serve their needs, says Gil Valadez, managing director of Prudential's Greater Southwest Agency.

A Perception and Education Issue

Part of the problem is how advisors perceive serving the Hispanic community, Valadez says. Many think that in order to do it right, they must speak Spanish fluently and they must have documentation in Spanish. However, there are a great number of Hispanic households where English is either the only language spoken or the dominant language, he says, which means advisors can easily work with them.

"There would be nothing that would prevent me from marketing to, say, women," Valadez says, "so there should be nothing stopping a qualified advisor from serving this community. There is no question that we need to do a much better job as an industry and do away with advisor preconceptions about the Hispanic population in general."

Valadez also believes that education is crucial within the Hispanic community itself. Most Hispanics still feel that they need to take care of their parents and their children, he says. This is cultural and it's the way it's always been, but it impedes their willingness and ability to plan for their own retirement.

"We need to help people understand that taking care of themselves is all right and that it will actually benefit their families more," he says.

Mata agrees that education and awareness within the Hispanic community are extremely important. Many Hispanics are wary of the financial industry, he says, so advisors have a better chance of approaching them if they partner with community-based organizations that are working on the ground.

Finally, it is also important to offer the Hispanic community appealing and affordable investment solutions, Mata says.

"Our study pointed out that because we are dealing with people of different income levels, we have to have instruments that are flexible, since many Hispanics are working in industries that don't typically offer employer sponsored retirement plans," he says. "Annuities are a good example of the kinds of products that can work, since they can be crafted in different ways to suit different people depending on their income levels and needs."