Tapping into the wealth of minority communities

Wealth managers have been so focused on shaking the trees for high-net-worth individuals in recent years that they’ve neglected to see the forest of minority market opportunities directly through them.

Minority markets have long been overlooked in America as financial advisors have generally preferred to fish for clientele in pools of established wealth. In many respects this is logical, of course, considering the time and energy it takes to prospect for new business. Like Willie Sutton, who robbed banks because “that’s where the money is,” wealth managers understandably gravitate to individuals with extensive, well, wealth.

Furthermore, it’s hard to blame an advisor for not chasing minnows when a single whale can help cover far more of their monthly nut. Smaller clients take as much time to service as big clients, or at least so the saying goes.

But for many savvy advisors, especially those who are minorities themselves, minority communities offer huge untapped potential and opportunities to grow those minnows into whales, developing strong relationships along the way.

“In my experience, both minority and female markets are actively aware that they need help managing and growing their wealth, but they often feel intimidated or unwelcome by our industry,” said Debra Brennan Tagg, president of BFS Advisory Group. “When they understand that you ‘get’ them and can provide services that they need with a fee that is transparent, they are very eager to work with you.

 “For us, it is a business case – there is just so much untapped potential in these markets,” she added.

TAPPING INTO MINORITY MARKETS

Tagg said she uses “transparency” and “candor” to gain access to minority investors, celebrating how they are unique instead of acting as if they won’t succeed with their finances.

“We engage them and we focus on them as individuals as opposed to a ‘female’ business owner or a ‘minority’ executive,” she said.

Delvin Joyce, financial planner at Prosperity Wealth Group, part of Prudential Financial, primarily serves Black Americans, and he said that often entails dealing with first-generation wealth. As a result, he finds his clients are passionate about building intergenerational financial security for their families. That makes them extremely coachable and enthusiastic about learning, he said.

Not only that, it also leads to referrals, the lifeblood of any advisory business.

“Working with a financial planner is a new concept in some minority communities, and our clients are typically so excited about the work that we’ve done with them that they want to introduce us to their friends and family, so a major benefit of bringing financial planning to minority markets is new client referrals,” Joyce said. “It’s very rare that we bring on a new client that was not a referral from an existing client.”

Sandra Cho, president of Pointwealth Capital Management, said being a minority herself has enabled her to tap into minority markets, whether that’s through someone she knew directly or a cross-referral from her network. That said, she believes special strategies aren’t necessary to tap into minority markets. Instead, she said, employers and companies need to properly vet their candidate pool, and not discount individuals as mere statistics.

“Individuals who are minorities use the same websites and databases as their non-minority counterparts,” Cho said. “It is just the fact that they are not the typical candidate or hire that a company usually makes. Thus, the burden is on the company to take the time to truly vet individuals, as their true value-add may be more than what first meets the eye.”

MY CLIENT, MYSELF

Having a diverse staff also provides a big advantage when attempting to break into minority markets. To put it in advisory terms, there’s a big difference between Finra’s “Know Your Customer” rule and truly knowing your customer through a shared background.

“We have the cultural competence to help our clients without coming from a place of judgement for mistakes they may have made prior to working with us,” Joyce said.

The benefits flow both ways, he added. “We personally benefit from working with diverse clients by knowing we are making a difference, reversing generational curses, and doing our part in helping to close the racial wealth gap by expanding access to financial planning advice.”

Similarly, Cho sees numerous benefits to running a diverse financial practice, including having a better chance of avoiding biases and potential pitfalls that a non-diverse financial practice may run into. This is the result of the wide array of personalities, opinions, and experiences that are present across a diverse company. In her opinion, that fact pays dividends, whether that’s in appealing to a wider range of potential customers, having a tighter-knit company culture, or having a broader set of entrepreneurial ideas.

“I have also found that a diverse workforce also fosters enhanced employee engagement and, subsequently, boosts employee retention and productivity,” she said. “A diverse workforce leads people to be pushed outside of their comfort zone as they are exposed to personalities and experiences that are new to them. This then motivates them to explore more and engage with those that are different than what they are used to.”

As for Tagg, she not only finds having a diverse staff more interesting but challenging as well.

“We have different ideas, backgrounds, experiences, and outlooks on where both risks and opportunities exist,” she said. “My world view may be completely different than my teammate’s, and that is a benefit for our clients as we consider all options for how they can succeed – or to identify where their plan may go off course.”