The best financial advisors know how to tune into each client's money history and individual story. This includes their cultural heritage—one of the most important factors in determining who we are around money. The more familiar you are with major themes and issues represented in various ethnic groups, the better you'll be able to understand where your clients are coming from and know how to speak to and educate them in a way they can comprehend and assimilate.
In 2008, I discussed many of these cultural issues in depth in two articles for Investment Advisor, "Minority Report" (July 2008) and "Minority Affairs" (August 2008). Enough water has passed under the bridge since then that it makes sense to update that summary.
"My client keeps his wife in the dark about their financial affairs."
In 2008, we discussed this macho attitude toward money as a characteristic of Hispanic culture. But according to Naguib Kerba, branch manager at Investment Planning Counsel in Mississauga, Ontario, it's not unusual among older immigrants from Mediterranean cultures as well.
"Among people who are 45 or older and from the old country (Italian, Egyptian, Spanish), the guy measures who he is by the job he's got," Kerba says. "He handles the money and makes the big-ticket decisions. In some cases, he is willing to exclude his wife from the discussions."
How should an advisor handle this? In general, Kerba insists on the wife being there. "Quite often, she trusts [the husband], is quite agreeable to his terms and isn't interested in being there. But I have a legal obligation to make sure she's informed."
He reminded me that this head-in-the-sand attitude is found among younger women, too. "My brother's wife, who is Canadian of Irish descent, has absolutely no interest in managing money. She trusts him so implicitly to make all the decisions that he's more than willing to forge her signature. I have my assistant go to their house to make sure she signs the documents herself."
Raoul Rodriguez Walters, president of Mexico Advisor in Portland, Ore., works with many clients with south-of-the-border backgrounds. Among older Mexican clients, he told me, it's usually the man who's involved in the finances.
"Most of the time, the wife doesn't know what's going on and delegates everything to her husband," he says. "There are occasions when I have to explain why it's important that they both be involved in the process—for example, they have separate wills and accounts—and sometimes they come around." In other situations, Rodriguez will ask the wife to sign a form saying that she's OK with not being present at meetings and surrendering financial decision-making to her husband.
Decide what kinds of situations you're willing to take on. If a client's attitudes make you too uncomfortable to do good work, the best solution may be to refer that client to another advisor.
"My client wants to put all his money in real estate and avoid the stock market."
After a market meltdown that left individual portfolios struggling to regain the value they held years ago, most advisors know about dealing with shell-shocked clients. But sometimes the bias is based on culture, not trauma.
In Ontario, Kerba reports, "a lot of people from Italian or Portuguese backgrounds believe in real estate being the be-all and the end-all. They'll work really hard to pay off the mortgage on the house, then buy a second house, or a house for a child, and work hard to pay off that mortgage. It's not unusual for me to see a client who has two or three houses and very little savings."
Kerba points out that the challenge for these clients will be at retirement. He predicts, "They will need to sell some of their assets or go into debt, which is foreign to them."
Home equity has traditionally represented wealth in Mexico too, Rodriguez told me. "Home is a tangible investment, whereas equities feel too risky to [Mexican clients], simply because the markets aren't that well developed in Mexico." When they come to the States, there may be a real need to educate and inform these clients about risk and returns. "We try to educate them about the fact that the market over time has outperformed real estate," Rodriguez says. "If they have 401(k)s, we try to get them to invest as much as possible. We try to get them to diversify."
