In Practice May 8, 2008

Hispanic Americans Have Self-Reliant Approach to Retirement

Although Hispanic Americans are saving for retirement, more than two-thirds do not use a financial adviser, a study by Prudential found.
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Even Hispanic Americans with income over $50,000 typically do not have a professional advising relationship; only 35% report having a professional adviser, says the “Hispanic Americans on the Road to Retirement” report.

Those that do work with an adviser have a higher tendency to contribute to a retirement savings account (85% versus 54% of those without an adviser).

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The number with advisers is lower in non-English-speaking households (12%) compared with English-speaking households (34%). Among Hispanic Americans that have an adviser, many choose a family member or friend (professional or nonprofessional). The study suggests that this could mean Hispanic Americans prefer fellow Hispanic Americans to advise them financially.

On Track for Retirement

Overall, the study found that Hispanic Americans are on track for retirement, with 90% ranking retirement savings as an important goal. Two-thirds (64%) are saving for retirement. Of those that save, more than half (54%) use a defined-contribution vehicle.

In Hispanic American households with an annual income greater than $50,000, the numbers in the survey are even higher. In this group, 81% of respondents said they are putting aside money for retirement. Of all survey respondents, more than a third of those actively saving for retirement have reached $100,000 in retirement savings.

A majority of Hispanic Americans are thinking about retirement, and the study says that advisers could bring some of these important issues to the surface. Seventy-one percent of Hispanic Americans say they at least somewhat think about how much savings they need for retirement.

While Hispanic Americans are known for having strong family ties, most do not plan on relying on their families for retirement security (but 32% do). The study found that Hispanic Americans take a very self-reliant approach, with 80% agreeing with the statement, “A successful retirement depends on careful planning.’ Thirty-one percent are relying on fate to determine retirement savings, but only 18% plan to rely on the government.

Selecting Services

Hispanic Americans hold high standards for the quality of financial services they receive, the study says. More than two-thirds rate top performance as important factors in selecting firms, products, and advisers. Other important factors include: dependability (73%) and independent ratings (54%). These factors were more important to respondents than low cost.

However, the majority of unacculturated households (which tend to be lower income) do rate low cost as important. Also, 57% of unacculturated households, which might not speak as fluent of English, said advertising targeted to them (such as Spanish ads) is important.

The study was based on interviews with Hispanic Americans ages 25 to 65 with a minimum household income of $35,000. It is available here.

In Practice May 8, 2008

Women Look to Advisers, Internet for Financial Information

Close to three-quarters of women who are very confident about retirement savings have the help of a professional adviser, a study by Prudential says.
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More than half (59%) of women surveyed named a financial adviser among their top three sources of financial information, and 34% ranked an adviser as their top source. Other sources listed in the top three were friends and family (61%) and the Internet (56%), the study says.

Generational Gaps

Across all generations, it is clear from the study that women use the Internet to learn about financial products, although it is much more prominent in the younger generations. Single women turn to the Internet as their first choice more than any other channel (36%).

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Millennial women (ages 25 to 29) rely on friends and family more than any other generational group, with 80% ranking that as their top choice, followed closely by the Internet (79%). This group is also the most likely to look to their employer (36%) for guidance.

A majority of Boomers surveyed (ages 43 to 61) rely on a professional adviser for financial information (62%). Only a third of Baby Boomers feel on track in their retirement savings, according to the data. The same number of women (36%) feel “a little behind but catching up” and 28% are way behind or have not yet started.

Independent Women

When it comes to an investment approach, many women take the reins themselves. More than a third (36%) of women are self-directed, 17% are adviser-dependent, and 47% show a mixed approach. The self-directed approach is most common among younger generations, with 66% of Millennials choosing this route, the study says.

While the do-it-yourself approach is popular among women, those who rely on an adviser are more likely to have a retirement savings plan (83%) than self-directed women (69%), the study shows.

Financial advisers play the most significant role to divorcees, as 41% named advisers as their first choice compared with 34% of married women and 22% of single women.

Saving Stress

Although 80% of the women respondents said having enough money to maintain their lifestyle in retirement is important, only 18% are very confident of achieving this (See Women Start Planning Early for Retirement).

Almost a third (30%) of the women surveyed said they worry about securing their financial future all the time/often. Interestingly, the Millennial and Generation X groups showed the most concern, with 36% and 34% worrying often, respectively. Unsurprisingly, the majority of women who are behind on saving worry often (53%), which is a much larger group than the women who have already starting saving for retirement (only 10% of this group worry often).

Less than a quarter of the respondents said they are “very well” prepared to make financial decisions related to workplace benefits, retirement, and other important financial planning matters. About half of the women behind in saving for retirement indicated that they are a beginner or need help with financial decisions (47%), the study says.

Across the board, women did not show a solid understanding of many financial products, but women on track in their savings fared much better than women behind in their savings. For instance 57% of women “ahead/on track” in their savings understand annuities, compared with 18% of women “way behind/not started.”

Prudential Financial’s Financial Experience & Behaviors Among Women polled 1,033 American about their financial knowledge, actions taken, and confidence in attaining their financial goals. The study participants were Internet users between the ages of 25 and 68 with a 2007 income of $50,000 or more.

The study is available here.

 

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