How Advisors Can Bridge the Money and Culture Gap

Cultural competency has major implications for business.

We can’t talk about money without talking about culture.

Every culture and identity has different ways of approaching the issues central to managing finances. There is no one-size-fits-all way to think about retirement, home ownership, paying for college, debt, family and community obligations, and even trust in financial institutions and the government.

What many advisors think of as conventional wisdom around these subjects is actually a white-centric approach to financial planning.

What we’re talking about is the concept of cultural competency. It’s a mistake to impose our personal judgments around money on clients, or to push rules of thumb on clients that are based and rooted on our own culture and identity and not that of the client.

Culture, as defined by Webster’s Dictionary, is “a way of life of a group of people--the behaviors, beliefs, values, and symbols that they accept, generally without thinking about them, and that are passed along by communication and imitation from one generation to the next.”

As my podcast and educational platform, 2050 TrailBlazers, notes, “by the year 2050, the majority of the United States population will be composed of minority groups. This country is a big, beautiful mosaic--but the financial planning industry isn’t a very good reflection of our rich and diverse population. Conversations around diversity, equity, and inclusion have been happening in the industry. Entire boards have been formed. But we’re still struggling to find solutions for building a more inclusive profession.”

Cultural competency has four major implications for business: the ability to serve as a true fiduciary, elevated client services, increased referability, and improved client retention.

Meet the New Class of Clients

There’s a new generation of clients coming up who are socially aware. They are looking at your board of directors, and wielding their money and power through cultural decisions. Simply put, they are putting their money where their mouth is.

They are also looking for a holistic approach to wealth building. Meeting clients where they are, becoming part of their family, and seeking to understand their goals and their actions (or lack thereof) from a holistic perspective is a model many financial advisors may want to follow.

This new generation is goal-oriented and entrepreneurial in spirit, and we’ve shared so much personal growth alongside them. As my partner and I have continued to grow our business, we’ve also helped many individuals build their own. Being a part of that journey has been truly rewarding.

In order to unleash this type of opportunity, financial planners must make their companies inclusive and attract and retain new clients in a way that makes them feel welcomed and understood.

Bridging the Gap Between Money and Culture

I’m so excited that Morningstar was inspired by Season 3 of my podcast to launch a series of columns for advisors on the need to understand the impact of culture on money and how to better serve clients.

For example, In the Islamic culture, all forms of interest are considered “riba,” which is forbidden under Sharia Law. This can make investing and saving incredibly challenging if you are not aware of alternatives. Another example is the cultural expectation of tithing to the church within African-American communities that needs to be considered when discussing budgeting.

In coming columns, Morningstar will present the experiences of advisors from different cultures and identities. In this column, I’ll lay out five key ways in which financial advisors can take the first steps toward greater cultural competency.

Step 1: Focus on Financial Empathy. To do our jobs well, a primary goal should be to understand the client's point of view. This approach is rooted in being an inquisitive learner, asking questions of your clients, and refraining from making assumptions. Consider writing a reminder and using part of your next call to check in on their well being and allow them an opportunity to share with you. I heard a story about a grandmother at a VITA event who elected to buy a big screen TV for her grandson with her tax return refund, instead of saving the money. At first, the tax preparer internally judged and criticized the decision until he learned her reasoning for doing so was to keep her grandson off the streets. The TV was a form of life insurance to safeguard her grandson’s well being.

Step 2: Practice Active Listening. By elevating our focus in Step 1, practice active listening by reserving judgment, giving verbal and nonverbal feedback, be patient, ask open-ended questions and repeat and rephrase what you’ve heard to confirm. When you find yourself starting to pass judgment like the tax preparer did in the previous example, try to peel back the layers by asking questions.

Step 3: Do Your Research. This part is all about self-education. Besides learning first-hand accounts from your clients, leverage alternate resources like podcasts, videos, and articles (like this series). Be open to finding new resources and continue to ask questions along the way.

Step 4: Consider Different Fee Structures. Many advisors may not be conscious of it, but their fee structure can play a real role in closing the doors on a more diverse group of clients.

The assets under management model holds hostage the financial knowledge to those who have had the time and opportunity to accumulate wealth, either individually or generationally, and it takes some cultural awareness to appreciate this.

For example, there’s the concept of a “Black Tax.” I’ll explore this in detail in my next column, but in brief, it’s the manifestation of the costs and financial obligations imposed on Black families by societal or systemic inequities--such as redlining--that have led to a general lack of intergenerational wealth. The result is that the AUM model will prevent even many young Black professionals earning well into six figures from getting the financial advice that they need. However, a retainer fee--which many of our clients opt for--opens the door to them.

Step 5: Embrace Your Mistakes. If we start with the premise that at some point or another, we’ll all say the wrong thing, it makes moving forward easier. Everyone continues to learn and unlearn years of experience. This process is messy, and nobody is perfect. I encourage you to own your mistakes, apologize, and continue onward.

True Communication With Clients

Just like any relationship, the best ones are highly communicative, honest, and inspiring.

We like to think of financial services as a buttoned-up profession, rooted in strategy and prestige, but really we are helping our clients build a life to fuel their hopes and dreams.

Discussing money and personal histories with your clients is sure to bring up a host of emotions, including feeling overwhelmed, stressed, anxious, embarrassed, and more. We want to accept our clients as they are, and show them pathways to growth...allowing them to trust in our process and understanding that they will sometimes fail. This can be a very intimate experience for them, as well as for you. I encourage you to lean into this process.

This article written by Rianka R. Dorsainvil, CFP® originally appeared on Morningstar.com.