Financial advisors aren't dishing out new advice when they tell you to make like Warren Buffet and let your money work for you. But not everybody is heeding the guidance, with specific groups falling way behind when it comes to investment. More specifically, Hispanics and African Americans consistently underperform other groups when it comes to investing and saving. That's spurred one company, Dvdendo, to try to bridge the savings gap with new technology as their secret sauce.

What's causing the problem?

The lack of investment and saving from Hispanics and African Americans ties to a complicated web of logistical and cultural factors and isn't simply a matter of poor choices.

  • A 2014 survey from Prudential found that, when compared to the general population, Hispanics typically have less access to workplace-based retirement plans (72 percent versus 83 percent).
  • According to the Prudential survey, half of Hispanics surveyed said they had a poor or very poor understanding of U.S. workplace-based retirement plans. This holds true regardless of income or country of birth.
  • Two out of three respondents (67 percent) participating in the Prudential survey said they financially support someone else (e.g., minor or adult children, grandchildren, other relatives), with 42 percent of non-U.S. born Hispanics sending money to relatives in a home country. By comparison, only 52 percent of the general population supports extended family. While 16 percent of Hispanics support parents, only 3 percent of the general population does.
  • The aging population is increasing as young adults struggle to get on their feet financially, resulting in a growing sandwich generation that's caught trying to help those older and younger than they are. According to 2013 data from Pew Research Center, 21 percent of Hispanics and 8 percent of blacks report being in this situation. Only 5 percent of whites are.
  • Income rankings of whites, Asians, Hispanics and blacks have remained unchanged for nearly three decades, according to 2015 data from the Federal Reserve Bank of St. Louis. In 2013, median family wealth for these groups in inflation-adjusted dollars stood at $134,008, $91,440, $13,900 and $11,184, respectively.
  • According to Latinum Network, although whites comprise just 63 percent of the American population, more than 79 percent of the nation's financial advisors are white. Lack of racial diversity within the industry might make it harder for professionals to actively educate and engage minority groups.
  • Unstable economic conditions in many Latin American countries of origin affect the perception of what is considered "long term" investing, according to Latinum Network. Many Hispanics thus may define "long term" as being as short as three to five years, whereas non-Hispanics usually think of long term being 30 to 40 years. This makes it harder to realize the depth of investment and patience required for security in retirement.

Looking outside ethnicity

Even though Hispanics and Africans are at a higher risk for not meeting investment goals, investing has become more difficult across the board, especially for millennials. A Harris Poll revealed that just 21 percent of millennials are investing in the stock market. Those who aren't investing said they don't do so because

  • they feel like they don't have enough money (40 percent)
  • they don't know how (34 percent)
  • they're overburdened by student loans (13 percent).

Additionally, millennials, who have been conditioned toward the use of technology, are hesitant to trust organizations. The Harris Poll showed that over a third of millennials (37 percent) would trust a payment app more than a traditional investment firm with their money.

Steps to erasing the hurdles

No single approach can address all of the investment issues outlined above. But according to Gabriel Montoya, Dvdendo's CEO and Cofounder, employers can take three simple steps to counter a lack of saving among workers:

  1. Increase financial literacy.
  2. Provide access to simple and automated products.
  3. Support increased diversity among financial advisors and communication strategies that take socioeconomic and cultural factors--including language--into account.

To this end, Dvdendo has developed an automated investment platform designed to improve investment awareness, foster education and boost investment access. Although the tool is targeted to Hispanics, it's available for any U.S. citizen or permanent resident who is at least 18, as well as resident aliens with a variety of visa types. It allows you to place funds in a brokerage account and invest in a portfolio of securities. It features

  • no credit check
  • unlimited withdrawals and deposits
  • no minimum investment amount
  • $1 monthly fee for balances $5,000 or less; 0.25 percent annual advisory fee for balances over $5,000
  • Debit or credit card linking for additional savings when you spend
  • Social connection options for sharing your progress with friends or family

Importantly, Dvdendo is not alone in using a tech approach to get people to build a portfolio. Apps like Robinhood, Betterment and Wealthfront all cater to the millennial's craving for mobile, on-demand assistance. Dvdendo, however, is one of the few bilingual platforms specifically designed to cater to minority needs.

Financial professionals are recognizing that technology can be the push consumers need to do more with their money, as they offer significant convenience, portability and, very often, little or no cost. Whether you work traditionally or use an investment platform like Dvdendo, be proactive. The sooner you put your money into the game, the sooner you'll be set up to win.

Published on: Sep 25, 2017