Leafing through a typical personal finance magazine, you’ll often find tips on getting student loans for a college-bound child, advice on choosing an assisted living center for Grandma, and profiles of young professionals who have saved $250,000 for retirement by the time they’re 30. If only everyone were so smart, so sensible, so self-reliant!
Then you hear Saundra Davis, executive director of Sage Financial Solutions in San Francisco, say, “One of the glaring differences I notice in working with Latino and African-American clients is the responsibility they feel to support other family members financially.”
As I suggested in last month’s “Minority Report,” many of us have blind spots in dealing with clients from different cultures. If we want to serve these clients well, we need to understand their background, their history, their attitudes, preferences, and fears.
In this article we’ll address some of the differences you may find among clients of Muslim, Jewish, Indian, Japanese, or Chinese origin. Perhaps some of you will be jarred to learn that the American emphasis on “standing on your own two feet” is the exception, not the norm, and that the charitable giving which many of us view as discretionary is regarded by others as a divinely-ordained duty.
Muslims–Privacy and Sharia
Taking care of extended family members is a top priority in Arab cultures, according to Middle East Institute Scholar David Mack, a former U.S. ambassador and Deputy Assistant Secretary of State.
As Mack explains, Arabs are expected to share the profit from commercial activities with members of their family. In addition, Islam reinforces the social safety net by obliging Muslims to care for widows and orphans and provide charity to less fortunate members of the community. These practices help check unbridled accumulation of riches in the hands of a very few.
However, the emphasis on “sharing the wealth” with kinfolk also results in nepotism and other favoritism to relatives or tribal members. “What looks to Western eyes like non-economic and even unethical behavior is generally tolerated or even encouraged by Arab society,” Mack says. “Most of the time, corporations are channels through which the wealthy and powerful take care of their family.”
Finances stay under wraps though. “As private as money can be for Americans, it’s more private for Iranians and others from the Middle East,” observes Mohammad Vedadi, a financial advisor with Ameriprise Financial in Minneapolis. “It would be taboo for an outsider to ask how much they make, or what they do for a living. Even within the family, you don’t talk about it.”
Born in Iran, Vedadi grew up in the U.S. Most of his clients are American-born, but he also attracts newcomers from the Middle East. Despite his Iranian heritage, cultural differences make it hard for him to turn immigrants into investors. “There’s a stock market in Iran, but only a small percentage of people know anything about it,” he says. “Instead, they invest in gold, silver, or property — commodities they’ve been familiar with for thousands of years. My Middle Eastern clients and prospects, especially those who are older, still have that bias ingrained in them. It’s hard to get them to think about investments that are conceptual, like mutual funds, or to place a high emphasis on long-term financial planning.”
The precepts of Islamic law present a further difficulty for devout Muslims. Vedadi explains that Sharia, which encompasses the body of Islamic religious law, forbids believers to profit from companies that charge interest or are involved in producing or marketing liquor, gambling, pork, or pornography, among other taboos. Fortunately, he has found some Sharia-compliant funds managed by the Amana Mutual Funds Trust (see IA Mutual Fund Spotlight, September 2007 –”Principled Performance“) to offer prospective investors.
The mortgage business is thriving for Islamic finance firms, which don’t charge interest and aren’t involved in the current subprime debacle. According to an article in The Washington Post, firms such as Guidance Residential and University Islamic Financial offer a variety of home financing options that Muslims are comfortable with.
These firms give a homebuyer the same opportunities that conventional lenders do, but with a twist: the finance company buys the house, then resells it to the eventual homeowner at an agreed-upon markup. The markup is kept competitive with the prevailing mortgage interest rate, so the buyer’s monthly payment is roughly the same as it would be with a conventional mortgage. An alternative is a lease-to-own contract similar to car leasing. In a third variation, the buyer and the finance company form a limited-liability entity to own shares of the real estate. All of these approaches circumvent the notion of riba or excessive gain that would result from “renting” money (i.e. paying interest).
Although not every religious authority thinks these arrangements are necessary to comply with Sharia, the Federal Home Loan Mortgage Corporation bought more than $250 million worth of Islamic home loans in 2007. That’s only a drop in Freddie Mac’s $1.77 trillion bucket, but it shows that this kind of mortgage is one way you can help Muslim clients integrate their religious values into their financial life.
Jews–Family and Justice
As anyone familiar with “The Merchant of Venice” will remember, Jewish minorities in Christian Europe were often restricted to just a few roles in society, one of which was moneylending. This heritage has certainly contributed to the popular perception of Jews as shrewd businesspeople. Less commonly acknowledged is the importance Jews place on giving back to the community.
Larry Gellman, managing director of Private Wealth Management at Robert W. Baird & Co. in Tucson, Arizona, has worked with Jewish clients since launching his career 28 years ago. Back then, he says, “many of my clients had emigrated from Europe or were born to immigrant parents. They worked hard, made a lot of money, and felt tremendously grateful for the chance to create a new life. Lots of people they’d known, people smarter than they were, had never made it out of Eastern Europe.”
These hard-working entrepreneurs had no concept of retirement. They would dismiss as meshugah (crazy) the idea of quitting work once they reached some abstract milestone. Play golf for the rest of their life? They wanted to keep working until they died! In the meantime, they gave generously to Jewish organizations and invested in Israel Bonds. Since then, people like these and their families have started foundations and endowments, giving millions of dollars to U.S. colleges, communities, social causes, and medical research.
Stuart Mellan, who heads the Jewish Federation of Southern Arizona (and is also my brother), reminds me that philanthropy has different meanings for Christians and Jews. The Christian word “charity” is rooted in the Latin word for “affection,” while the comparable Jewish term tzedekah literally means “justice.” To Jews, in other words, giving is not so much an act of love toward one’s fellow beings as a responsibility handed down by God. In this respect, Judaic and Islamic laws are not far apart at all. Mellan adds that Judaism teaches that even a poor person should try to provide something for those who are needier, but one should never deprive oneself or one’s family of the basic necessities in order to fulfill this commandment.
Another commonality between the two cultures is the focus on helping family members. For Jews, this takes the form of ensuring a good education for one’s children. In all the Jewish families I ever knew, paying for the kids’ college (in full) was nothing short of an obligation. You might not have enough money to do it, but you’d do it anyway. I recall how worried my father was when I applied to college and later to graduate school. We were far from wealthy, but he was ready to pay the fees somehow. When I received full scholarships for both, he was profoundly relieved.
A generation ago, Gellman says, his Jewish clients invested disproportionately in real estate because “investing in stocks felt like a crapshoot.” Since then, Jews have become so well assimilated into American culture that he sees virtually no attitudinal differences between Jewish investors and other clients.
Indians–Money and Karma
In recent decades, India has sent the U.S. a flood of entrepreneurs, high-tech professionals, and other educated immigrants. When I asked Devang Shah, a CFP (India and U.S.) with Right Returns Financial Planning in Mumbai, India, how these newcomers were likely to behave as financial consumers, he described several contrasts between Indians’ and Americans’ ways of relating to money. “These differences certainly apply to Indians living in America, particularly first-generation immigrants,” he cautions. “As they integrate with the mainstream, the differences will become less noticeable.”
One of the most notable differences is Indians’ huge appetite for saving. They tend to put money aside without compartmentalizing it for a purpose such as education or retirement. Investment choices are usually conservative.