Tony Reyna, the youngest of seven children, grew up outside Laredo, Tex. His parents, Mexican immigrants, were migrant farm laborers, and when the children were old enough, they joined their parents in the fields of southern Texas.
"We worked until we were in high school, and then when my sisters went to college, we supported them," he remembers. "Then when they were out of college, they supported me."
Mr. Reyna is now a program manager for Independent Financial Marketing Group Inc., a Purchase, N.Y., company that forms partnerships with banks to sell their customers insurance and investment products. He uses his family's experience to illustrate some of the factors banks and other financial companies must consider when marketing investment products to Hispanics, the fastest-growing minority group in the United States.
He supervises a team of eight full-time financial consultants who work in various branches of International Bank of Commerce, which is headquartered in Laredo and has branches in Texas and Oklahoma. These consultants have $400 million of assets under management, according to his firm.
IBC, founded in 1966 by Antonio Sanchez Sr., got its start serving the small-business market in Laredo. It has since grown to $10.5 billion of assets and has a heavy concentration of Hispanic customers, particularly in branches at or near the Mexican border.
South Texas has a much larger Hispanic population than most areas of the country (Texas is one of a growing number of states in which the combined populations of "minority groups" constitute a majority), but it is really just an extreme example of a larger trend.
Hispanics are the largest minority group in the United States, according to the Census Bureau. Its most recent estimate counted 41.3 million, or about one-seventh of the population, and they accounted for one-half of the U.S. population growth in 2003 and 2004.
With numbers comes economic power. Hispanics are estimated to have buying power of more than $700 billion this year, and that number is expected to surge to $1 trillion by 2010.
Even at relatively high income levels, Hispanics remain underrepresented among investors. A 2003 study by Mediamark Research Inc. found that 13% of Hispanics earning $75,000 or more held common stock, and 14% owned mutual funds. By comparison, 18% of all Americans in that income category owned common stock, and 21% invested in mutual funds.
However, a consistent effort to market to affluent Hispanics can have its rewards. According to Gerald Schwebel, the executive vice president who runs IBC's international division, the bank's income from its relationship with Independent Financial is growing 10% to 15% a year.
Whatever the needs and economic status of their clientele, banks that sell insurance and investment products to Hispanics are looking at a vastly underserved market, according to the Federal Reserve Board. And there is good reason to think that early entrants will have a bigger-than-usual advantage over latecomers.
A 2003 report by the Boston consulting firm Celent LLC said that Hispanics are generally more loyal customers than people from other ethnic groups, so the potential return on an early investment in marketing to Hispanics is a value proposition for banks.
Research released this year by Barbara Robles, an associate professor at Arizona State University's School of Social Work, found that only 9% of Hispanic households owned stock or mutual funds, compared with 12% of African-American households and 35% of non-Hispanic white households.
Part of any sales strategy is identifying what customers want, and according to Mr. Reyna and his colleagues at Independent Financial, IBC's customers are looking for a safe way to invest for their families' future.
Particularly among immigrants and children of immigrants, he said, there is a powerful desire to ensure that the younger generation enjoys a better standard of living than their parents'.
"Parents say to their children, 'Yes, I'm doing better than my parents were in Mexico. But I want you to do even better than me,' " Mr. Reyna said.
This produces demand for products that protect assets and provide financing for higher education, he said.
"Over all, Hispanic culture is conservative in nature," he said. "The areas we have more success in are packaged products" like fixed annuities, mutual funds, and 529 college savings plans.
Of course, his investment advisers cannot sell products until a prospect walks into the bank, and drawing Hispanic customers into financial institutions has long been a challenge.
Mr. Reyna recalls that, in his childhood, he rarely saw his parents use a bank - a situation common in the immigrant community, at that time and today.
A report that Synergistics Research Corp. released in May said that half the Hispanics in this country have no relationship with a depository institution.
"You have to understand the culture of the Hispanic community that comes from Mexico and migrates to the U.S.," Mr. Schwebel said. "In Mexico, people are not accustomed to having checking accounts. It is a cash society. They are not accustomed to saving money in a bank. You have to create that culture of savings and of not having to have so much cash and letting it grow their money."
Though many banks are busy developing a strategy to address the growing number of Hispanics, IBC, by virtue of its sites near the Mexican border, says it has never made the ethnic group a distinct subset of its customer base.
Part of what makes IBC attractive to such customers is the fact that 75% to 80% of its branch employees near the border are bilingual, and many are of Hispanic descent.
The bank also reaches out to the community with financial literacy programs, which are often necessary to familiarize recent immigrants and their children with what the industry can offer.
"Part of it is the culture," Mr. Schwebel said. "In Mexico they have only just created a lot of savings programs similar to 401(k)s. That was not something ordinarily seen in Mexico; only the wealthy had access to banks, checking accounts, and credit cards."
As immigrants become part of the U.S. society, "they learn the necessity of homeownership, of saving for college, and of good, sound credit - all of these things that they or their parents didn't necessarily have," he said.
IBC employees, from bank officers to tellers and support workers, participate in numerous financial literacy courses in Laredo-area schools, including the federal Junior Achievement program and those focusing on more specific areas like savings or checking.
The aim has never been to target Hispanics, Mr. Schwebel said. "We target all schools, but all of our schools are predominantly Hispanic anyway."
More broadly, "we need to instill more of that savings culture in all of our society," he said. "I don't think we do enough for all groups - part of it is something the entire banking community needs to do more of."
Frequent contact with bankers also helps dispel some of the significant trust issues between banks and the Hispanic community. This distrust, though not as dramatic among people of Mexican origin, is also significant among other Latin American immigrants. In many cases they come from countries with unstable governments, where banks are seen as instruments of the (often corrupt) ruling party.
Overcoming such distrust provides more than just financial gain for banks, Mr. Schwebel said.
"When you find these youngsters coming out of the schools and coming to work for us or becoming the area's future small-business men and women, it is rewarding," he said.
Once IBC gets customers in the door, though, the education process is just beginning. Those who come to Mr. Reyna's team looking for advice on insurance and investment products often need information about the basics of investing.
"Our approach is to go to whatever level of explanation we have to for the customer," Mr. Reyna said. All his financial consultants are bilingual, "so they are able to offer clients that conversation in both English and Spanish."
Frequently, the consultants find that customers whose English is quite good prefer to speak Spanish to their investment adviser, he said.
Mr. Schwebel said his employees find this is also true for a small but financially important segment of the bank's clientele: high-net-worth foreign nationals who hold U.S. accounts for investment or travel purposes.
These clients tend to be "more sophisticated and more interested in investment strategies and tax implications" than the bank's typical customer, he said. But many of the things that appeal to U.S.-resident Hispanics also please the foreign customers, including a welcoming atmosphere, a bilingual staff, and the ability to obtain a safe, secure means of increasing assets.
"These are investors who come from Mexico, and many like to talk with and deal with Hispanics. They are either doing business here, or are visiting here, or have kids in college here," he said. "They have accounts not only to facilitate their businesses and their visits, but also for security purposes."
Mr. Garver, a reporter in American Banker's Washington bureau from 1999 to 2003, is a freelance writer in Springfield, Va.
