Financial advisors, where have you gone?
The next time financial advisors sing the blues about falling life insurance premiums, ask them when they last reached out to an African-American prospect. Chances are they probably haven’t. But they should.
Advisors ignore this market segment at their economic peril, according to the latest survey of the African-American Financial Experience released by Prudential.
It’s not so much that advisors are walking away from buying power that is expected to reach $1.1 trillion by 2015, according to some estimates — although that is a giant market to ignore. It’s that the African-American segment has a much higher predisposition for life and income protection products than the general population.
For advisors, this market segment practically has been handed to them. So why do African-Americans report that they lag behind the rest of the population when it comes to having been contacted by a financial advisor?
“They have been ignored. I think [the] reason for that is that there are these old myths playing in advisors’ minds on the return on what that would be,” Alexandra Galindez, Prudential vice president of multicultural marketing, said.
Only 19 percent of African-Americans surveyed report having a financial advisor, compared with 30 percent for the general population. The survey also showed that 48 percent of African-Americans report ever having been contacted by an advisor compared with 55 percent for the general population. The survey was conducted by GfK Public Affairs and Communications from March 7 to 19.
Galindez said advisors need to hang a shingle — metaphorically speaking — and walk the streets of minority neighborhoods, become part of the fabric of the African-American experience, plug into community networks and, most of all, remain committed to the long term.
The financial rewards, small at first, compound over time as word spreads at the local grocery, in the churches and on the basketball courts that there’s value to a visit with a financial advisor, and that a good adviser knows how to protect assets and provide safety first, and then see to it that those assets grow.
The survey, which included 1,153 African-Americans 25 to 70 years old, with household income of at least $25,000, found that while a higher percentage of the general population owns investment and retirement products compared with African-Americans, a higher percentage of African-Americans owns insurance products.
As many as 40 percent of African-Americans owned individual life insurance compared with 37 percent for the general population, the survey found. In addition, 16 percent of African-Americans owned long-term care insurance compared with 13 percent for the general population, and 18 percent of African-Americans owned disability insurance compared with 16 percent for the general population, the survey found.
Not only is the African-American market segment predisposed to buying insurance, it is also predisposed to buying income protection from advisors since “engagement with financial institutions — although improved since the financial crisis — remains low,” the report said in an introductory note.
More than half of the respondents (51 percent) said that a financial advisor could help them make a better financial decision, and 8 of 10 respondents said an advisor’s gender or ethnicity does not matter. “This is an opportunity, and regardless of your race, you should be pursuing this opportunity,” Galindez said.
The survey, Galindez said, underscores the shortcomings of the industry’s distribution network into a huge segment of the market. She said Prudential plans to distribute the survey results among its cross-functional teams of institutional and retail advisors to encourage them to engage African-American consumers.
“There’s a big gap between need and desire, and the availability of the product, which is really on the advisor. And we really just have to close this gap,” Galindez said.