When planning for BIPOC clients, a “one-size-fits-all” approach just isn’t enough
by Travis WalkerMr. Walker is an Advisor Specialist with Allianz Life. Visit www.allianzlife.com.
As a financial professional, you’ve built your career on helping clients achieve their financial goals. Part of that process is learning about your client – their background, hopes and goals for investing, saving and ultimately, retiring.
But a new study shows that for clients who identify as BIPOC (Black, Indigenous, and People of Color, including Hispanic and Asian/Asian Americans), there’s an opportunity to enhance those connections, and build understanding at a deeper level.
The 2021 Retirement Risk Readiness Study* from Allianz Life Insurance Company of North America (Allianz Life) found that, across the board, fewer BIPOC respondents are getting professional help with their finances when compared with white Americans (38% Black/African American; 44% Hispanic; 36% Asian/Asian American; versus 46% white).
Filling The Racial Wealth Gap
These findings indicate a significant opportunity to better help those communities plan for their financial future and address risks that might derail a retirement strategy. So while we know the need is there, it’s also important to address the why. The racial wealth gap has created longstanding disparities between races, and as a result impacts every facet of their financial lives.
Taking a closer look, when asked why they are not currently working with a financial professional, more than one-third (37%) of Black/African American respondents said it was because they “don’t have enough money,” versus only 30% of Hispanic and Asian/Asian American respondents. For Asian/Asian Americans, the biggest barrier was cost, with 45% indicating it “costs too much” to work with a financial professional versus 27% of Black/African American and 26% of Hispanic respondents.
Hispanic respondents report being most active in the financial planning process, with four in 10 indicating they have made a formal financial plan with a financial professional, versus less than one-third (32%) of Black/African Americans and only about a quarter (26%) of Asian/Asian American respondents.
Once we understand these perceived barriers, the financial services industry can be better prepared to approach BIPOC communities and offer a greater level of tailored support for them in building and maintaining financial and retirement strategies.
A More Tailored Approach
While we know the opportunities are there, it’s also important to understand that a one-size-fits all approach simply will not work when helping BIPOC clients.
The study looked at various concerns and risks to retirement security, and found differing levels of worry among each community. While the top concerns are consistent, Black/African American respondents tend to be less worried across the board, with Asian/Asian Americans the most worried and Hispanic respondents falling somewhere in the middle.
Consider this breakdown of some of the key retirement risks, and how each community reports feeling about each (% worried):
Healthcare costs will be so high you can’t afford the care you need
The rising cost of living will prevent you from enjoying your retirement
The cost of living will increase and you won’t be able to afford necessities
That you won’t be able to take care of yourself
Running out of money before your die
The market will take a downturn and hurt your nest egg
You’ll become a financial burden to your loved ones
These risks need to be factored into retirement strategies, but the different levels of worry and how each group prioritizes the concerns should play a major factor in each individual retirement plan.
It is also noteworthy to consider that family and cultural dynamics play a critical role in how worried different communities are about retirement risks. For financial professionals, taking the time to understand these subtleties and the unique concerns of BIPOC clients is of the utmost importance.
Our Industry’s Responsibility
As a whole, our industry has an opportunity and a responsibility to help BIPOC communities prepare for a successful financial future. As part of this, we must place more focus on understanding their unique concerns, tailoring approaches to address how each BIPOC community thinks about retirement to ensure everyone is able to attain their financial goals.
*Allianz Life conducted an online survey, the 2021 Retirement Risk Readiness Study, in December 2020 with a nationally representative sample of 1,000 individuals age 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k.
The study included an oversample of the following BIPOC ethnicities: Black/African American: 396 responses; Hispanic: 386 responses; Asian/Asian American: 370 responses.