The relationship between financial advisors and ethnic investors has unique elements, including the attitude those investors have toward the advice they are given and the kinds of advice advisors offer to ethnic investors.
Spectrem’s Ethnic Segmentation Series report Advisor Relationships and Changing Advice Requirements indicates that ethnic investors are less likely to use advisors than non-ethnic investors and more likely to do their own investment research. When investment advice is accepted by ethnic investors, it is often more varied than non-ethnic investors get.
The Spectrem report examined investment relationships for African-American, Hispanic and Asian investors.
The report shows that while only 42 percent of non-ethnic investors admit to doing more of their own investment research, 57 percent of Hispanic investors are spending more time on investment research. Forty-eight percent of Asians and 47 percent of African-American investors are doing likewise.
While only 26 percent of non-ethnic investors believe they can do a better job investing than professional advisors, 35 percent of Asians and 30 percent of Hispanics feel that way.
Once the investor-advisor relationship is established with ethnic investors, the advice they receive is often different than the advice given non-ethnic investors. For instance, ethnic investors are far more likely to be told to invest aggressively than non-ethnic investors. Sixteen percent of African-American and Hispanic investors report that to just 8 percent of non-ethnic investors.
In many cases, African-American investors are more often encouraged to extend their investment reach. More than one-third (36 percent) are encouraged to find tax-free investments, and 28 percent are being advised to plan for long-term health care. In both cases that is far more than non-ethnic investors.
Hispanic investors are more often encouraged to invest in stocks (36 percent). Asian investors (the l east likely among ethnic investors to use advisors) report a greater percentage advised to develop a more conversation portfolio (32 percent, to 22 percent of non-ethnic) and invest in bonds (26 percent, to 21 percent of non-ethnic).
The study reveals that 22 percent of affluent African-American investors and 18 percent of Hispanic investors are advised to reduce debt. Only 4 percent of affluent Asian investors were given that advice, and only 10 percent of non-ethnic investors were so advised.
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