Thursday, June 4, 2015

Hispanics & Retirement Planning: A Marketing Perspective

Financial services companies in the United States have been lured by the promise of the growing Latino market.  Many have tried to engage Hispanic consumers with different financial services offerings.  Few have succeeded and it is likely that lack of historical and cultural knowledge have contributed to a patchy track record.

Retirement and the family
According to a 2014 study by Prudential 53% of Hispanics compared with 62% of the rest of the US population say that saving for retirement is an important priority. Retirement is a culturally derived concept.  Many Latinos still hold on to the value that retirement is a step in life in which they will be supported by the children they raised with so much care. They expect these children to be there for them.  Many anticipate retirement as a part of family life during which they will help take care of grandchildren and enjoy their “golden” years in a family environment.

It would never occur to many Latinos that their kids would place them in an institution.  The feeling of reciprocity for all they have done for the children is an important element of family trust.  This way of thinking is derived from Latin American tradition.  As one gets older new generations take over and assume responsibility for their elders. Thus retirement is not really a completely separate phase in the life of Latinos but a continuation of a way of life.

As Hispanics have generally helped support their children and many relatives and friends during their productive years, they believe these people will do the same for them in their old age.  Some are right but many are not as cultural and social norms evolve in the US.

Retirement and country of origin
Many Hispanics have immigrated to the US with the intention of returning “home” to rejoin family and friends.  They save for building a home back “home.”  Their intentions are to return but the dreams of return often become frustrated by the difficulties back “home,” and by their children’s integration in their new society.  The dream of going back “home” turns out to be a dream after all.  Many of these US born children share partly in the love for the country of origin of their parents but feel mostly at home in the US.  This is a struggle of generations and of frustrated dreams. Retirement back home is elusive.
Retirement and debt
It is generally known that Latinos are averse to debt.  This tendency has deep cultural roots that may trace its origin to the Arabic belief that lending and debt are taboos. The notion of only spending what you have is deeply embedded in the culture.  Only buying what you have the money for appears to still be prevalent among many.

This tendency stands in the way of saving for retirement as many Latinos prefer to spend their current assets as opposed to using them in the future. If these Hispanics believe that buying retirement is an important immediate goal, then they may be willing to accumulate savings for their future retirement. The incentive, however, for saving for retirement is not strong as long as they believe their family and friends will be there for them when they need it.

Retirement and saving behaviors
The Prudential study referred to above documents that pension plans and savings in general are less popular among Hispanics than among the rest of the population. For example 19% of Hispanics report having an Individual Retirement Account compared to 39% for the rest of the population.  

Lack of savings and participation in pension/retirement plans has to do with lack of resources, lack of education and information, and mistrust in these plans and programs.  As the affluence of Hispanics increases over time, their participation in savings and retirement related products will increase but they need to be educated and informed about these plans.  They must trust the institutions and those who sell the products.

What can marketers do?
As we indicate in our book “Hispanic Marketing: Connecting with the New Latino Consumer” sales personnel who understand the culture and are proactive in reaching out to Hispanics are likely to succeed.  These sales people or agents can have a powerful influence in how future generations of Latino retirees fare in their advanced years.

  1. Agents must become aware of the cultural barriers and sincerely involved in the Hispanic community in order to establish trust and engagement. If Hispanic consumers feel they have a true ally they will be willing to listen and purchase a savings product.  Not only that but these consumers are likely to spread the word among their friends and relatives about the quality of the agent.
  2. Agents need to be more personally involved in establishing relationships, going to homes, spending time with families, listening to needs, and genuinely trying to solve felt problems of their Latino customers.
  3. Agents need to spend time understanding the cultural nuances of these consumers and attempting to learn basic concepts in Spanish.  While the Spanish language may not be as fundamental for communication now as it was a few years ago, it still has strong emotional connotations that will more readily communicate the importance of savings and how life is changing for Latinos in the US.  The agent is as good as s/he can empathize with the Latino consumer.

Overall, there is ample opportunity for marketers of financial services to serve the Hispanic population.  The opportunity will only grow.  Establishing a foothold in the community is fundamental for future product and brand growth, but more importantly to assist Latinos with their retirement needs.  These needs will only grow as the population ages.

The moral of the story is:  Cultural knowledge and trust lead to success.