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Market Shifts Equal Opportunity for Financial Professionals

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What You Need to Know

  • Members of three major BIPOC groups seem to be less likely to be talking to financial professionals.
  • Their interest in talking to financial professionals is strong.
  • One possible solution: More financial professional outreach.

Managing finances through the pandemic has no doubt been challenging for many Americans.

But as we know, assistance from a financial professional can be especially beneficial during times of high uncertainty and volatility like we’ve experienced recently.

Whether help is needed with day-to-day budgeting or longer-term concerns like retirement planning, financial professionals have the expertise to bring more clarity to difficult financial planning topics.

Unfortunately, those tasks were likely more difficult for Americans who identify as BIPOC — Black, Indigenous, and People of Color, including Hispanic and Asian/Asian Americans — over the past year due to lack of professional assistance.

We looked at this in the recent 2022 Retirement Risk Readiness Study, an online survey, conducted in February.

The survey team based the results on a nationally representative sample of 1,000 individuals age 25 and older in the contiguous United States, with an annual household income of $50,000 or more, if they were single, or $75,000 or more, if they were married or with a partner, or at least $150,000 in investable assets.

The study also included an “oversample” of respondents who identified as Black/African American (388 responses); Hispanic (355 responses); or Asian/Asian American (373 responses). The sample did not include an oversample of lndigenous peoples.

For each BIPOC community included in the study, the survey team found a decline, when compared with 2021, in the likelihood that survey respondents reported working with a financial professional, even as the financial professional engagement level of white Americans stayed about the same:

  • 24% Black/African American, down from 38%
  • 35% Hispanic, down from 44%
  • 32% Asian/Asian American, down from 36%
  • 48% White Americans, down from 49%

This lack of engagement with financial professionals could be causing feelings of unpreparedness.

BIPOC respondents were less likely than white participants to say they felt prepared to support financially the various things they’d like to do or the passions they’d like to pursue over the course of their life:

  • 62%
  • 68%
  • 72
  • 78%

While it’s certainly discouraging to see that BIPOC communities aren’t getting a higher level of financial planning help compared to last year, perhaps more concerning is the fact that the decline is only serving to exacerbate the racial wealth gap.

One reason why engagement may be on the decline could be a matter of prioritization. For many members of the BIPOC communities included in the survey, the process of financial planning with the assistance of a professional is still relatively new and could still be viewed as more of a luxury than a necessity.

As such, when times are tough, those additional expenses are often dropped in favor of more pressing priorities.

The good news is there is desire from BIPOC communities to get help.

The percentage of BIPOC respondents who have never used a financial professional but said they would consider using one grew for each group: to 37% for Black/African American respondents, up from 32%; to 34% for Hispanic respondents, up from 30%; and to 39% for Asian/Asian American respondents, up from 34%.

So what can financial professionals do to take advantage of this trend?

Here are three things to keep in mind when making or improving connections with BIPOC clients.

1. Research.

Creating or developing a better relationship with BIOPC clients starts with gaining a better understanding of each group and their specific concerns.

As the Retirement Risk Readiness Study shows, the specific financial planning needs for each BIPOC community included in the survey have likely evolved during the pandemic, dictating the need for more specialized professional assistance.

For Black/African American respondents, declining confidence in being able to financially support all the things they want to do (71% vs. 77% in 2021) has them finding more value in working with a finpro on short-term planning issues like balancing a budget (37% for Black/African American respondents, vs. 27% for white respondents, 30% for Hispanic respondents, and 29% for Asian/Asian American respondents) and paying down debt (31% for Black/African American respondents, vs. 20% for white respondents, 29% for Hispanic respondents, and 20% for Asian/Asian American respondents).

Hispanic respondents are more likely than others to regret some financial decisions they are making during the pandemic, and more likely to seek assistance with managing finances to support their family including leaving a legacy (28% for Hispanic respondents, vs. 19% for white respondents, 18% for Black/African American respondents, and 20% for Asian/Asian American respondents) and staying in their home (20% for Hispanic respondents, vs. 10% for white respondents, 11% for Black/African American respondents, and 11% for Asian/Asian American respondents).

Asian/Asian American respondents are more likely than others to find appeal in working with a financial professional who provides holistic financial services to help them meet their retirement goals (51% for Asian/Asian American respondents, vs. 41% for white respondents, 50% for Black/African American respondents, and  44% for Hispanic respondents) and are more worried about managing the rising cost of living (73% for Hispanic respondents, vs. 58% for white respondents, 60% for Black/African American respondents, and 69% for Hispanic respondents).

2. Not “Never,” Just Not Now

As noted above, it’s important to understand that many BIPOC Americans do want help managing their finances, but they’ve had to press pause in order to address different aspects of their lives.

That’s completely understandable given the fact that the effects of the pandemic are still causing complications for a large percentage of the population.

Financial professionals should not view the decline in engagement seen in the study as a stop sign; they should consider it more like a yield.

Finpros should keep their new or inactive BIPOC prospects in mind and start doing occasional check-ins to see if the prospects are ready to reconnect.

3. Navigating a Two-Way Street

We know that fewer BIPOC Americans are getting financial planning assistance than last year, but there is still a desire from many to get help.

So is this a case of BIPOC clients not reaching out or of finpros failing to be proactive with the BIPOC market?

Most likely, it’s a combination of both, which means a proactive approach is necessary to bridge the gap.

The sooner that financial professionals realize the issue of BIPOC engagement is a two-way street, the sooner they can develop strategies for outreach that will result in positive outcomes, whether that meanings establishing a formal client relationship or simply starting conversations to discover what retirement risks are most concerning.

There is a huge opportunity for the financial services industry to advance economic inclusion for BIPOC communities.

As risks to retirement increase in frequency and severity, it’s important that BIPOC Americans view financial professionals as trusted partners who can help them accomplish both their short- and long-term financial goals.

By putting more of a focus on outreach and understanding, we can develop the meaningful relationships that are necessary to change the current narrative.


Travis WalkerTravis Walker is a business solutions and diversity consultant at Allianz Life Insurance Company of North America.

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