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Dow Jones & Company, Inc.
Brokers Woo Hispanics, But Market Still Largely Untapped
By Cheryl Winokur Munk
June 13, 2003
NEW YORK -(Dow Jones)- When Aileen Gallegos hosts a seminar on 401(k) investing, she does something that not many other brokers do. She conducts the session in Spanish, which is a selling point for the Hispanic-American clients she targets.
"They've got kind of a double obstacle in front of them. Not only do they not understand (about investing), but no one is speaking in their language to help them understand," said Gallegos, a Mexican-American financial consultant with RBC Dain Rauscher in Albuquerque, N.M., who generates about 50% of her assets under management from Hispanics.
Gallegos is certainly not the only broker to target the fast-growing Hispanic-American market, which is now the largest minority group in the U.S. As their numbers and economic clout have grown, it's an obvious area for brokerage firms to focus and some have been doing more aggressively. But despite an added emphasis, the market remains largely untapped.
"I don't think it's well served at all. The Hispanic market was an afterthought to many of the financial firms," said Emil R. Infante, a financial advisor with Raymond James Financial Inc. (RJF) in Miami who generates about 90% of his business from Hispanics. "Before everybody thought that the Hispanics in the U.S. were those who worked in the field, or in clerical jobs" or cleaning jobs, said Infante who was born in Puerto Rico to Cuban parents.
There were 37 million Hispanics with $580.5 billion in buying power in 2002, according to data from the Census Bureau and the Selig Center for Economic Growth at the University of Georgia. Their economic clout is expected to grow to $926.1 billion in 2007, accounting for 9.4% of all U.S. buying power, up from $223 billion, or 5.2%, in 1990.
"The reality is you have a client base, or potential client base in the U.S., with an increased purchasing power and savings," said Jorge Pinto, director of the Center for Global Finance at Pace University's Lubin School of Business. Yet, brokerage firms "are not paying too much attention to this yet."
Indeed, based on the size of the Hispanic market, firms are spending 50% below what they should be to advertise investment services, according to a recent study done for the Association of Hispanic Advertising Agencies by Santiago Solutions Group, a San Francisco consulting firm.
Nonetheless, Hispanics in financial services is one of the hottest categories this year, said Joe Zubizarreta, chief operating officer of Zubi Advertising in Miami. He is expecting firms to do more advertising in 2004, since plans for this year have already been set.
Firms have largely left the task of attracting Hispanics to individual brokers, many of whom are Hispanic themselves. Indeed, big firms such as Morgan Stanley (MWD), UBS AG's (UBS) UBS Wealth Management, Prudential Securities and regional firms including Legg Mason Inc. (LM), Raymond James and RBC Dain Rauscher said they have brokers who focus on Hispanics, but don't have a company-wide focus on growing that business.
By contrast, some firms like Citigroup Inc.'s (C) Smith Barney and Merrill Lynch & Co. (MER) said they are taking a bigger role in trying to woo Hispanic customers.
Smith Barney, for example, conducts seminars across the country in places it has identified as having the largest pockets of Hispanic wealth, said Mindy S. Ross, managing director of target market initiatives. The firm also creates marketing materials and advertising in English and Spanish for brokers to use with Hispanic clients. This effort has been underway for about three years, Ross said.
Merrill Lynch launched an effort last June to raise its profile with Hispanics and currently has about 300 Hispanic and non-Hispanic brokers specifically focusing on this market. In addition, Merrill is looking increase the number of Hispanic brokers it employs to about 500 by next year, up from 350, said Mario Paredes, director of Hispanic business development.
Others like A.G. Edwards Inc. (AGE) and Charles Schwab Corp. (SCH) said they are also trying to do more to win business from this desirable clientele.
A.G. Edwards, for example, is beginning to make marketing materials available in Spanish, said Angela Ruffin-Stacker, assistant manager of the financial consultant recruitment department. The firm is also looking to recruit more Hispanic brokers.
Schwab, which has designated branches for its Spanish-speaking clients as well as a call center for them, is looking for ways to make its services known to non-customers, said Julio Velis, sales manager for the firm's Hispanic marketing efforts. Consultants from the designated branches also help conduct seminars in other Schwab offices for Spanish speakers, he said.
The Hispanic market is not one that all brokers want to target, or find success in. Most Hispanics, for example, are unwilling to work with people they don't know well. They also tend to be clustered in major cities such as Miami, Los Angeles, New York and Dallas.
When municipal bond broker Joseph Maya returned to Miami from New York 13 years ago, he thought business from Hispanic-Americans would start pouring in. But it didn't, at least not right away. "It was very difficult getting Latins to do business with me. They didn't know who I was," said Maya, a Cuban-American broker with FMSbonds Inc. Now, however, about 60% of his business comes from Hispanics. "It's not a matter of your name or whether you specialize in one thing. It's more about trust," Maya said.
Speaking Spanish is a major plus for brokers who want to target Hispanics. "Even though they speak English here in the states, it's the comfort factor for them," said Fred Siegel, president of the Siegel Group Inc., a registered investment advisor in New Orleans.
Only about 10% of the company's assets under management are from Hispanics, but Siegel is hoping to change that. He's publishing his book "Investing for Cowards" in Spanish, hiring a Hispanic broker and creating brochures in Spanish. In addition, a new Spanish and English Web site for the firm is under construction, said Siegel, who is not Hispanic, but speaks Spanish.
Winning Hispanic clients can also be a matter of location, as Legg Mason broker Jason Sarratea discovered. Only about 5% of his business comes from Hispanics, but not for lack of trying, he said.
Sarratea, whose family is from Costa Rica, said he has been stymied by the fact that the Baltimore Hispanic population, which is mostly working-class, tends to have fewer assets to invest than Hispanics in some other parts of the country. "The market is just not here in this general vicinity," he said.