Look For Opportunity In The Financial Sector
Given the growth in the U.S. Hispanic population, their participation in the financial sector can positively affect our country's wealth. We must move beyond the heavy research focus on the percentage of the Hispanics who are "unbanked" to an understanding as well of financial participation and what communication methods to reach Hispanics might be effective. By doing so, our research can contribute to faster economic growth, and we just may improve the incentives that Hispanic households have to take part more broadly in financial services and investing -- and, thus, improve standards of living and prospects for longer-term economic growth.
To examine the "invested" and "banked" from October 2008 through April 2009, Knowledge Networks conducted a further survey of 28,754 nationally representative general population online interviews, of which 2,511 were among Hispanics, on the topic of financial services. Please note that the sample does include Hispanics who did not have Internet access prior to joining our KnowledgePanel® as they were given a PC and an Internet Service Provider.
Investment profiles diverge
We found that 39% of the adult Hispanic population invests in some way -- a little more than half the 74% proportion for the Caucasian non-Hispanic population. This statistic alone, however, does not tell the tale of the difference between the two groups in their investment profiles. First, while about 22% of each group has only one investment, the depth of investment participation quickly diverges. Specifically, 16% of white non-Hispanic America has two investments vs. 7% of Hispanics; and only 10% of the Hispanics have three-plus investments, while 35% of whites do.
Second, we examined Total Assets. Excluding primary residence, we find that 19% of Hispanics have assets of less than $50,000, while the rate is 23% for Caucasian non-Hispanics. The difference between these two groups is even smaller when looking at assets between $50,000 to $99,999, which represent 7% of Hispanics and 12% of the Caucasian cohort. The predominant investment-ethnicity gap is found at the $100,000 level -- here the proportion of Hispanics (13%) investing is one-third that of Caucasians (39%).
So, what are the kinds of investments that Hispanics participate in, and how does this compare to white, non-Hispanic investors? What each group sees as the two most attractive investment instruments is identical; yet participation levels are disparate. Each is most heavily participating in 401K or 403B accounts -- 24% of Hispanics and 42% of non-Hispanics whites. IRA investment is the second strongest for each, but the 34% level for whites is almost three times higher than that seen among Hispanics.
All other investments for Hispanics are in the single digits, including real estate, stocks, bonds, money market funds, mutual funds, and annuities. The same is not the case among non-Hispanic Caucasians, who more broadly (about one-quarter) participate in the stock market, money market and mutual funds. The opportunity for further investment participation among Hispanics is clear, as is the presence of investable assets.
Clear preferences in how, where to bank
Unlike their investment profiles, Hispanics and non-Hispanic Caucasians are not that different when it comes to the number of financial institutions used by a household. A comparative analysis of their banking behavior indicates that 37% of Hispanics bank in only one institution, compared to 32% of the Caucasian non-Hispanics. Differences, however, occur in the banking options Hispanics and non-Hispanic whites participate in, along with where they bank and the ways they handle their financial transactions.
Our research shows that, even in the economically advanced U.S., 14% of Caucasian non-Hispanics do not have a checking account, which rises to 23% among Hispanics; while 61% of the former have one checking account, among Hispanics the level is only 47%. The roughly ten-point gap continues when we asked, "Do you have a savings account?"; 39% of Hispanics do not, and 36% have one savings account, vs. 29% and 48% respectively for whites.
Yet a higher proportion of Hispanics are likely to have more than one savings account. There is also a skew regarding where Hispanics bank in comparison to non-Hispanic Caucasians -- 40% of Hispanics bank at Bank of America, 20% at Washington Mutual, and 24% at Wells Fargo vs. 26%, 11% and 15% for Caucasian non-Hispanics respectively. Institution availability and /or population outreach plays a role that is unquantified in our analysis, but the skews in bank choice are evident.
If banking and investment profiles are to be improved, how we do best communicate with Hispanics? Our results indicate that among Hispanics who are "banked," 75% handle their financial transactions face to face, and the majority prefers to continue doing so. All other methods -- be it online, phone or mail -- evoked less than a 25% preference level. So the efforts to engage Hispanics must be high touch.
Clearly there is room for increasing Hispanic participation in our financial sector -- and for doing so in ways that speak to their specific needs and preferences. In any economic climate, finding ways to evoke comfort and confidence in investors and savers, especially those who are part of a growing proportion of the population, is key; operating with a clear understanding of Hispanic actions and attitudes will make your financial marketing that much more effective.