Language, food, family – there are many aspects of everyday life which can differ based on a person’s ethnic background.
The same can be said of the ethnic background of an American investor.
Spectrem’s new study on the differences in investing based on the ethnic background of the investor shows not only where ethnicity impacts investing decisions but also where ethnicity plays no role in investment decision-making. Ethnic Influences on Investment Decisions surveyed investors with at least $100,000 in net worth (not including the value of their primary residence) who identify as White, Black, Hispanic and Asian to determine how their investment priorities differ and to see if there are true delineations that can be identified based on an investor’s ethnicity.
In many cases, the differences are not broad, but they are statistically significant. In some cases, the differences are broad.
Here are some of the highlights from the study:
· Age and assets: A controversial fact from a political and societal standpoint, the white population of investors is much older than other ethnicities on average. One consequence of the aging of the white population is that many of them are both wealthier and more likely to be retired, which is both a positive and a negative from an advisor standpoint.
· While it is possible that many Hispanic investors are first-generation affluent or wealthy, many Hispanics identify inheritance as a wealth creation factor. Like Black investors, Hispanics have a heavier than average preponderance of business owners, so they will make decisions that benefit both their personal and their business finances.
· Black investors also have a higher-than-average representation in private business ownership, but the one standout characteristic of Black investors is that they are more likely than others to pay close attention to their investments and prefer to be involved in the day-to-day management of their investments. Advisors need to take this possible interest into account when discussing strategies with their Black clients.
· It seems like a stereotype, but Asian investors are more likely than others to be employed in the field of Information Technology. As such, they are going to lean toward innovative investment opportunities and welcome discussion on new technology companies.
· Both Asian and Black investors report a preference for more frequent contact with their advisors than the average investor.
It is inappropriate and potentially harmful to make assumptions on any new or existing client based on race, gender, age or wealth level. But it is also revealing to know how investors from certain demographic segments differ from other investors. The value of Ethnic Influences of Investment Decisions is in showing that ethnic differences in investors can point advisors in distinct directions based on an investor’s ethnic or cultural background.
©2019 Spectrem Group
Keywords: ethnic, white, black, asian, hispanic, Spectrem, investors, advisors, age