The Hispanic population is, like the wave of baby boomers, poised to crest in the United States and its financial services industries, according to J.D. Moya, president of Pegasus Insurance Group, Albuquerque, N.M.
Moya says that if life insurers want to ride that wave, they need to understand a significant part of its energy: the Mexican community.
Mexicans make up 66% of the 40.4 million Hispanics in the United States, according to a 2004 survey from the U.S. Census Bureau.
A number of traits and needs will help insurance professionals better understand Mexican-Americans, according to experts interviewed by National Underwriter.
First, the traits that insurance producers say are critical to understand: the importance of family, a conservative approach to money, the importance of trust and the establishment of relationships.
Next, the needs they say are necessary to satisfy: the need to be educated on financial products, and the need to both protect and educate their children.
Moya says the need to own a home is a fourth driver of the Mexican community. A total of 55% of Mexican-Americans say they are optimistic they will buy a home within five years, according to Moya.
Another point he raises is that because many Mexican-Americans are in the service industries and many own their own businesses, there is a need for health coverage.
Given these two facts alone, Moya says there should be a big market for life insurance to protect the home owner’s family in case of death, as well as health insurance products, such as Health Savings Accounts. An insurer who could offer HSAs or other employee benefits “would probably be overrun with business,” he continues. And, if the life insurance offers guarantees, so much the better, he adds.
One reason that Mexican-Americans are so concerned about the preservation of the money they have, Moya says, is that it does not come from investment income but is money that they went out and worked for.
Moya says the Mexican community has more money to spend on life insurance than might initially be thought. He cites the example of his plumber, a 36-year-old man who has a family. He asked his plumber if he had insurance to protect his wife in the event of his death and was told that the plumber had a $50,000 policy. Moya suggested that this would be insufficient to protect her and asked the plumber if he could set aside at least some money and make an annual commitment to an indexed UL contract. The plumber put up $40,000 and made an annual commitment of $5,000. It was a matter of educating him about how to better protect his family, Moya says.
That focus on work may be one reason why retirement ranks fourth among Mexican-Americans as a financial priority, according to Moya, because if people are focused on making a living and caring for family, retirement is not as high a priority.
Juan Job, corporate vice president, Hispanic market, with New York Life Insurance Company, New York, says Mexican-Americans are not only the largest segment of the Hispanic community but also the youngest in both actual age and arrival in this country.
But even if many entrants are perceived to be at the lower end of the economic scale for the moment, the Mexican-American community is so large that there is still a sizeable middle market life insurers can service, he continues, citing a 2005 survey from the U.S. Census Bureau that notes that Hispanics lead all other minority groups in the number of businesses owned.
Since there are so many closely held businesses, owners will need to assure that the business is passed from generation to generation, he adds.
One of the hallmarks of this community, according to Job, is the tendency to send money home to family in Mexico. So, he continues, a needs analysis may have to include ways to protect family both in the United States and in Mexico.
“One main observation is that the market is probably underserved as a general population and is more underserved among the Mexican population,” says Nick Pierson, Northwestern Mutual Financial Network, Tucson and Newport Beach, Calif.
Pierson sees two things when he makes calls to Mexican-American clients: the need for trust and the need for financial education.
“Among the first generation, it is like a drought,” he says. “They need as much information as possible.”
When they work with financial institutions, many tend to work with banks as opposed to brokerage firms because they are familiar with banks, Pierson says.
Their children’s education is also important, Pierson says, adding he has learned that from his work in efforts advanced by the Tucson Hispanic Chamber of Commerce and the University of Arizona alumni association. There are a tremendous number of first-generation children in schools, he notes.
There is less emphasis on retirement, he explains, because while many Americans feel that they need to take care of themselves, Mexican-Americans tend to rely more on family members to help them in their retirement years.
Bobby Blanco, an advisor with Woodbury Financial Services, El Paso, Texas, says 60%-70% of the people he works with are of Hispanic origin, many of whom are Mexican.
Blanco says there are a few takeaways from his work with that community: they are not big risk-takers; they want guarantees and safety; and, they will usually only work through referrals and trust only over time.
“They want to protect their money,” Blanco says. “They are more conservative than my American clients.”
Privacy is a big issue for these clients, Blanco says, and they do not want people, including family members, to know their financial business.
Robert C. Cadena Jr., a financial advisor with MassMutual’s South Texas Agency in San Antonio, says many of his clients are second and third generation with needs that are very different from first-generation Mexicans. The age range of Cadena’s clients is generally 50-70 and their interest is in anything that will protect their families, he says. Because of this, they want to know about long term care insurance and annuities, although Cadena says that sometimes they don’t buy as much insurance as they should.
Since most of his clients are worth between $500,000 and $2 million, he says he usually recommends an AB Bypass Trust rather than life insurance for estate planning purposes since the combined exclusion of husband and wife totals $3 million. The cost of such a trust, he says, is approximately $5,000 as opposed to a $15,000-$20,000 premium each year. If they have more than $2 million, Cadena says he will recommend an ILIT or a comparable trust.
Once he gains the parents’ trust, they often recommend that their children work with him, he says.
“The easier way is to work with one generation and then bring the other generations in,” says Reginald Hartwell, a financial consultant with AXA Advisors, New York. He says most of the families he works with have generations that live in separate households, but some of his prospects have multigenerational families in the same homes.
There are three components to the Mexican-American community, Hartwell says: the older members who are going back to Mexico; the older community who plans to stay in this country; and, the younger community that wants to become established and work.
Some of his clients are sending money back to their homeland either in the hope of returning eventually or in order to bring family members here, according to Hartwell. But, once again, family is the focus of conversation. “They are very concerned about family and keeping them financially secure.”