Serving the Financial Planning Needs of the Hispanic Community

According to the U.S. Census Bureau, the Hispanic community now represents over 63.7 million Americans, more than 19% of the population. The Hispanic population in the United States is growing, as is the demand for financial advisors who understand the needs of this diverse community. For CFP® professionals who currently serve or are looking to expand their services to the Hispanic community, understanding the cultural and personal experiences that shape how Hispanic clients handle money is the first step in creating a meaningful and actionable financial plan.

Understanding the Diversity of the Hispanic Community
“Somebody asked me the other day: what is the biggest mistake that people make about the Hispanic Community?” said Elaine King, CFP®, CFP Board Ambassador and founder of the Family and Money Matters Institute, whose client base is primarily Hispanic individuals with personal and business interests across Latin America. “It’s that they assume we’re all the same.”

For non-Hispanic advisors, the diversity of the Hispanic population can make it difficult to grasp how cultural factors influence the way Hispanic clients handle their money. Louis Barajas, CFP®, founder of International Private Wealth Advisors, observed, “Non-Hispanic advisors often accidentally impose their values and global beliefs onto their Hispanic clients because it's so hard to understand the Hispanic Community.”

The diversity of the Hispanic population comes through in many ways — including geographically. Like King, Barajas serves a primarily Hispanic client base, the majority of whom are based in either California or Florida. Over time, he’s noticed significant differences between these regions. Barajas observes that his clients in California, specifically Los Angeles, are more likely to have immigrated from Mexico. These clients are less likely to have received higher education, and many of them are blue-collar workers with fewer assets. On the other hand, Barajas’ clients in Florida tend to be more affluent and often more conservative with their wealth management strategies than his West Coast clients.

King works closely with clients who immigrated from different areas of South America. In her experience, she has even found it difficult to predict how different clients from the same region will react to any given situation. “For each family, there is a unique code of culture and expectations that we need to understand in order to be effective as financial planners,” said King.

Learning How Cultural Traditions Influence Financial Planning
Family and cultural traditions are incredibly important for the Hispanic community, so it’s important for CFP® professionals to understand how strong traditions and familial ties impact how Hispanic clients plan for their financial futures.

According to a Merrill Lynch report, Hispanic investors are three times more likely than the general population to be driven by a desire to make their family proud. King has also found this to be true in her work. “I plan both with the family and for the family,” she noted.

Both King and Barajas noted how many of their Hispanic clients also operate family-owned businesses. Data from the 2020 U.S. Census Bureau shows that the Hispanic-owned businesses grew over 8% in from 2019 to 2020, to account for 6.5% of all business in the United States in 2020.

“In a family-owned business, it’s hard to separate the family from the business,” noted King. “You tend to hire your cousins, brothers and sisters.” CFP® professionals can offer valuable perspective as a third-party, helping guide family businesses through transitions and ensuring that the business is set up for future success.

Both Barajas and King noted the importance of including key cultural events in client’s personalized financial plans. For young Hispanic women, a quinceañera is a landmark event. A quinceañera symbolizes a girl’s entrance into womanhood upon turning 15. For many Hispanic families, the quinceañera is an event for which multiple generations of family members contribute funds to create a memorable party for the young woman.

“I realized that when I created financial plans for clients with young daughters that I had to include the quinceañera,” said Barajas. “But I learned to work with my clients so that funds were also set aside for things like college.”

By taking these steps and demonstrating a genuine commitment to understanding Hispanic culture, CFP® professionals can build strong, long-lasting relationships and make a meaningful impact on their clients' financial well-being.

Knowing When to Call in Outside Experts
Sometimes, CFP® professionals need to understand when to pull in additional experts to advise on specialized matters, both in clients’ professional and personal affairs.

Both King and Barajas noted that their clients frequently ask for assistance in facilitating cross-border transactions, such as sending money internationally or setting up estates with international beneficiaries. But many CFP® professionals may not have extensive experience in this area.

“Making alliances with attorneys or tax experts in the country of origin can be very helpful,” noted King. “It can be incredibly complex to navigate the various rules and regulations in different countries.”

Barajas also noted how frequently his role as a financial planner can turn into that of a life planner. From hiring a Spanish-speaking therapist to a marriage counselor, professional assistance beyond that of a financial planner can be a necessary tool to ensuring that clients are emotionally prepared to focus on their financial futures. It is also important to have an understanding of the psychology of financial planning. Working closely with clients to understand their biases and beliefs about money can open the door to different issues that a CFP® professional might not be equipped to address.

"In the Hispanic community, our money decisions are often driven by emotions,” said King. “For CFP® professionals, understanding the cultural complexities and unique money stories that drive client’s decisions is essential for empowering individuals so that the Hispanic community can thrive as a whole.”

By understanding the diversity within the Hispanic community and taking a culturally sensitive approach to financial planning, advisors can better serve their Hispanic clients and help them achieve their financial goals and aspirations. “In many of my Hispanic clients, I see an ingrained poverty mindset that makes them feel unworthy,” said Barajas. “I work with my clients to show them that money is good and a tool to live a better quality of life.”