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A holistic approach to reaching African-American consumers

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The Great Recession was felt by all Americans. However, a recent study shows the downturn impacted African-Americans far more than the general population. Unfortunately, those who financially helped or supported family members faced greater economic hardship than those who did not. This reality sheds some light on the importance that African-Americans place on providing for and protecting their loved ones, despite the potential burden that those choices may have on their own financial situation.

This commitment to family could help explain why the African-American population is more likely to value and purchase life insurance than any other group. According to a study from the Voya Retirement Research Institute, 85 percent of African-Americans have and know about life insurance, a percentage that is higher than their Hispanic, Asian and white (non-Hispanic) counterparts.

The African-American population will total 74.5 million by the year 2060, making up nearly 18 percent of the U.S., according to 2012 data from the U.S. Census Bureau. This steady, continued growth presents a strong opportunity for the life insurance industry, given that both insured and uninsured African-Americans are more likely than the general population to express a desire to buy life insurance in the near future. And while African-Americans at all income levels are more likely to own individual life products, they often do not own adequate coverage and may be receptive to a review of their current policies.

Even if African-Americans, as a group, don’t need to be persuaded that life insurance is a priority, they can still benefit from the advice of financial professionals who take a holistic approach to retirement planning. Providing a broader view of their financial picture can help individual clients better understand the choices they are making, and how those choices could undermine their long-term financial security.

An industry survey shows that saving for an emergency, reducing credit card debt and developing budgets are considerably more important for African-Americans. Compared to the general population, middle-market African-Americans are more concerned about paying off student debt and about carrying debt into retirement.3 In Voya’s multicultural study, this group ranked “reducing debt” as their most important short-term financial goal — and for good reason.

Every demographic is affected by student debt, but women and minorities are among the hardest hit, according to a May 2013 article in U.S. News & World Report. African-Americans are most likely to have significant student debt and the second most likely to carry car loans or other non-housing debt. They are the least likely to have credit cards, but those that do are unlikely to pay their full balance each month and twice as likely to incur late fees.

African-Americans also lack cash reserves, making them more likely to pull from a retirement plan in an emergency. In fact, African-Americans with retirement plans are more likely to remove money from these plans in case of an emergency, and might not understand the negative effects of that decision.This underscores the need for this group to protect themselves with products like individual life, critical illness and accident insurance.

Conventional wisdom recommends six months in cash reserves to cover unexpected expenses, but according to Voya research, most African-Americans had slightly less than 2.5 — the lowest among all groups. One quarter had no emergency reserve at all. With high debt and low savings, it’s no surprise that this group is far less likely to be confident that they can save enough money for retirement.

African-Americans face a number of economic challenges, but there is reason for optimism. About half of middle-market and affluent African-Americans think their need for professional advice has increased recently, and more than half prefer to purchase life insurance face-to-face.The preference for in-person advice allows agents to evaluate their clients’ current policies and help them enhance that level of protection. Additionally, and more importantly, face-to-face interaction allows financial professionals to act as a trusted resource for their clients.

Middle-market African-Americans want advice for retirement planning more so than the general population.3 Financial professionals can gain trust and build long-term relationships by listening to their clients’ concerns and presenting options for products and services that support a holistic retirement readiness strategy.