Minorities Building Money Know-How

For years attorney Veraunda Hubbard shied away from financial investing.

But after attending a financial seminar recently, she is beginning to wade through stock tables and mutual-fund listings.

Hubbard, who is black, has a lot of company around the country. They are mostly minorities who are afraid to invest or aren’t knowledgeable about Wall Street.

“I think it’s something we haven’t been paying attention to,” said Hubbard, 27. Financial experts agree.

“It’s going to be detrimental if we don’t participate in the economic growth of this country,” said Cheryl D. Broussard, a black financial adviser and author based in San Francisco. She has hit the national lecture circuit, preaching the gospel of investing to minorities.

Reaching minority investors is not easy. The first stumbling block is there are few minorities working in the financial industry. News reports indicate 2 percent of sales staff at securities firms are black. However, minorities trust “their own” the most, Broussard said.

Minorities also tend to bet on “safe” investments such as savings accounts and certificates of deposit because they are federally insured. A national financial survey in 1995 of 4,300 households published in January’s Federal Reserve Bulletin revealed stark differences in white and minority household finances.

Only 6 percent of minority households own stock, compared with 18 percent for whites. And about 4 percent of minority households own mutual funds, compared with 15 percent for whites. A mutual fund invests in various stocks; investors own those stocks indirectly.

One reason for the disparity in investing is income. Minority households have a lower median net worth - $16,500 compared with $73,900 for whites, according to the federal survey, conducted every three years. Median means half are above and half fall below. Minority includes all ethnic/race groups.

“You can’t expect people to engage in certain kinds of behavior if they don’t have the wherewithal to do it,” said Margaret Simms, an economist at the Joint Center for Political and Economic Studies, a Washington-based think tank specializing in black issues.

Some minorities think there are hidden assets in minority communities. Because of minorities’ distrust of banks, some assets may be “mattress money.”

For instance, the federal survey showed 15 percent of all households did not have checking accounts. Of those, 54 percent were minority. About 23 percent of households without checking accounts said they don’t like dealing with banks, up 33 percent since 1989.

More minority professionals and groups are trying to change the way minorities think about money by teaching their brethren about investing. For example, Orlando’s African-American, Hispanic and Asian-American chambers of commerce have sponsored financial seminars for members.

“We are trying to get the small-business entrepreneur to be aware there is more to saving money,” said Lita Martija of the Asian American Chamber of Commerce.

Black, Hispanic and Asian financial advisers often must find creative ways to tap into their communities.

“I try to take my meetings to the neighborhoods where minorities live,” said Johnny O. Greene, a black investment executive with Paine-Webber Inc. in Orlando. The meetings usually are in someone’s home. Two out of 10 people will decide to invest, Greene said. About 20 percent of Greene’s clients are minorities.

Investment adviser Conrad Santiago concentrates on Hispanic professionals, but even within this market there are varying degrees of knowledge about the financial world.

He said about 20 percent of his clients know the stock market fairly well, about 40 percent understand it some, and between 30 percent and 40 percent don’t understand it at all.

Santiago, who is Puerto Rican and works for American Express Financial Advisers, said there is room for more Hispanic investors in the market. Hubbard, the attorney, and others are heeding the call to invest because people such as Santiago, Greene and Broussard are having an impact.

The financial advisers warn it is harder to build wealth without financial investments, which generally have a higher yield than conventional savings. Without investments, “you have to work harder to accomplish your financial goals. You have to put more money from your pocket, and your money doesn’t work as hard,” Santiago said. Adds Broussard, who is a financial adviser to CNN-FN’s “It’s Only Money” and author of “The Black Woman’s Guide to Financial Independence”: “It’s not so much the income or how much money you have. It’s what you do with it.”

Hubbard, who is president of the Paul Perkins Bar Association representing black lawyers in Orlando, is ready to make the leap. She said she wants “more than a house and car to show for working.” She earmarks 20 percent of her pay toward savings. By year’s end, Hubbard, who works for the State Attorney’s Office, plans to switch to mutual funds.

Linda Hayes-Gallegos, a 49-year-old Mexican, said she started to invest five years ago when she was “in a position to do so.” Paying a financial adviser to “play” with her money doesn’t appeal to her, said Hayes-Gallegos, a program coordinator at the University of Central Florida. She opted for direct payroll deduction.

A few minorities, such as Martija, John D.T. Lie and Ann Brown Harris, have been investing for far longer. They are among the few minorities who have successfully surfed this stock market wave.

Of the three, only Lie was exposed to the stock market at an early age. His father and grandfather before him were investors, said Lie, who is Chinese. He also is part of an informal group that meets to discuss stock market trends. Lie, who owns an export company, uses a discount broker to make trades.

Martija’s introduction to the financial world came 20 years ago via her husband, a doctor who was frequently targeted by investment advisers. Martija, a Filipina, uses a full-service broker. And Brown-Harris came by her knowledge as a banker, first with SunTrust and later as head of Metro Savings Bank, Central Florida’s only black-owned bank. She has urged family and friends to become more active investors, forming an investment club in 1983.

Club members invested as little as $25 a month and saw their investments earn an 800 percent return over time, said Brown-Harris, a 41-year-old African-American.

She predicts more minorities are poised to become investors.”We are first-generation managers. As more (professionals) look like us, then you will see higher investing,” Brown-Harris said.