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Financial Planning > Behavioral Finance

Affluent Asian Americans, Pacific Islanders See Passing on Wealth as Key Financial Goal

By Michael S. Fischer

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What You Need to Know

  • The Asian American and Pacific Islander community accounts for 7% of the U.S. population but represents 10% of its affluent population.
  • A Merrill Lynch study finds that 48% of AAPI respondents prefer to make their own financial decisions.
  • About a third of affluent Asian American and Pacific Islanders said a strong record of investment performance is key when choosing an advisor.

Asian American and Pacific Islanders are the fastest-growing minority community in the U.S. today, according to an August 2021 Census Bureau study. The AAPI community accounts for 7% of the country’s population but represents 10% of its affluent population, or those with a household income of at least $100,000.

In a new report, Merrill Lynch Wealth Management lays out research on the motivations, experiences and goals of the AAPI community, conducted to better understand its members and their financial needs.

The analysis focused specifically on affluent Chinese, Korean, Japanese, Filipino and Indian American communities, and considered region (e.g., Southeast Asia or East Asia), gender, time spent living in the U.S. and other relevant factors.

The report acknowledges that the AAPI community is more heterogeneous than any other minority group in the country, and trying to capture all the cultural nuances, mindsets and identities was beyond the project’s scope.

Family Affair

Some 80% of AAPI research participants said family is one of the most important aspects of their life, well ahead of hard work and self.

Members of the AAPI community are twice as likely as the general affluent population to feel financially responsible to assist aging parents. This responsibility is also a top-of-mind source of financial stress for many, according to the report.

That may have to do with feeling obliged to support family members in another country, something they are three times likelier to do than other Americans.

AAPI respondents were 50% more likely than the general affluent population to prioritize paying for their children’s education.

The AAPI community is also 25% more likely than the general affluent population to consider inheritance and passing down wealth as part of a financial plan.

Entrepreneurial Spirit

Twenty-seven percent of AAPI community members reported that they have started a business, and another 27% said they expect to do so in the future, compared with 13% and 33% of other affluent Americans.

AAPI individuals who have lived in the U.S. for five or fewer years are twice as likely as those born in the country to open a shop for themselves.

But as more career opportunities have become available for both American-born and younger generations, entrepreneurial desires have ebbed. The research showed that just 37% of AAPI respondents ages 20 to 54 expect to start a business, compared with 61% of the general population in the same age group.

The report noted that older generations who immigrated to the U.S. had few career options, and those newly arrived often face a similar lack of choices. As a result, they make their own opportunities by opening their own businesses.

Self-Reliance

The study found AAPI community members are self-reliant and hands-on in their finances. Forty-eight percent said they prefer to make their own financial decisions, compared with 33% of the general affluent population.

Forty-two percent prefer to learn about managing finances on their own, versus 32% of other respondents.

Only 54% of affluent AAPI research participants said they feel prepared for unexpected expenses and emergencies, compared with 61% of the general affluent population. At the same time, 72% of the former said it is important to be completely debt free, versus 65% of the latter.

Smaller percentages of both groups made an exception for mortgage.

Affluent AAPI participants are highly selective in their choices of whom to trust with regard to their finances. In choosing an advisor, 34% said a strong record of investment performance is key, compared with 26% of others who said this.

Likewise with financial institutions:

  • Large/national bank: Affluent AAPI at 59% versus affluent general population at 48%
  • Local bank or credit union: 49% versus 55%
  • Regional bank: 38% versus 49%

Research for this report took several forms, all conducted by Ipsos. It started with interviews of Merrill stakeholders who serve and represent the diverse communities covered in the report. Researchers also synthesized and reviewed publications and academic research on topics of diversity, wealth and inclusion in financial services and more.

Ipsos conducted quantitative research in spring 2022, involving 745 AAPI community members and, for comparison, a representative sample of 150 respondents from the affluent general population.

(Image: Shutterstock)

Michael S. Fischer

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