Hispanic Business Owners Struggle with Financial Planning

Mar 28

posted by Dr. Suri Weisfeld-Spolter in Hispanic Market | 18 Comments

South Florida is a multicultural area with a strong, vibrant Hispanic community that is an essential part of our culture and economy. Florida has the 3rd largest Hispanic population in the United States. The success of Hispanic-owned businesses is vital to our community and our local and national economies. However, there is one significant challenge that could potentially impede the levels of growth and success for Hispanic entrepreneurs as revealed by research stemming from collaboration between DBS Financial Group and Nova Southeastern University.

Results of the survey showed that in general they lacked in-depth understanding of financial products and services. Findings revealed challenges in 6 key areas where effective financial planning is extremely important for personal and business success and survival: family responsibility, levels of financial knowledge, retirement planning, achieving long-term goals, generational differences, and succession planning.

Major findings of the study included the following:

1. 80% of these business owners are financially responsible for dependents including children, parents, and other family members.

2. 51% have family members other than children who rely on them for financial support.

3. 43% have both children and family who depend on them for financial support.

4. Those with business revenues below $500, 000 were less knowledgeable than those with revenues above $500, 000 for both businesses and families.

5. All respondents shared that they do not believe that they are doing a good enough job preparing for retirement.

6. Business owners had achieving their long-term goal as top priority but were not sure of their ability to do so.

7. There is a relationship between the number of employees and business generation type. For example, 1st generation businesses have an average of 7 employees; 2nd generation, 6 employees; and 3rd generation, 19 employees.

8. 90% of the business owners surveyed expected to pass their business onto a family member.

Since financial knowledge is critical yet lacking, it is important to educate Hispanics about financial responsibility as this affects entrepreneurial success, local economic growth, and personal and family well-being. It is recommended that the Hispanic community actively seek opportunities available through business, academic, and professional organizations to learn more about financial planning.

Suri Weisfeld-Spolter, Ph.D., is Assistant Professor of Marketing and Acting Chair of Doctoral Programs at the H. Wayne Huizenga School of Business, Nova Southeastern University. She can be reached at 954-262-5192 or sw887@nova.edu Read More

This entry was posted on March 28, 2013 at 9:26 AM and has received 4159 views. There are currently 18 comments. Print this entry. Download attachment.

Comments

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• #1 by Cindy on 3/28/13 - 8:07 PM

  

  The relationship between number of employees and generation sequence is really interesting. I wonder want constitutes the higher numbers for the 3rd generation?

• #2 by Josh on 3/28/13 - 8:41 PM

  

  As a CPA in south Florida, I find your article insightful and to be very relevant since I see first hand some of the points that you mentioned.

• #3 by Morton on 3/29/13 - 1:16 PM

  

  I wonder how these statistics would compare to other ethnic groups in the same and other parts of the country. Do hispanic owners struggle with financial planning any more or less than other groups or is this something that the general population has an issue with?

• #4 by Suri on 3/29/13 - 4:18 PM

  

  Cindy, thank you for your thoughtful post.
  In our study, we found that 3rd generation Hispanic business owners tended to differ in many ways as compared to first and second generation business owners. Your question asked about what constituted the higher number of employees. This was an interesting finding in that the average number of employees for 1st and 2nd generation business owners was 6-7, while 3rd generation owners had an average almost triple that number, 18. One possible explanation for this is that by definition, business owners that were classified as 3rd generation had parents or grandparents born in the US. Therefore, these business owners were typically in business for longer, and therefore typically generated larger revenues as compared to the first and second generation owners, and therefore had a need for more employees.

• #5 by Suri on 3/29/13 - 4:20 PM

  

  Thank you for your post, Josh.
  Glad that you find my blog relevant.

• #6 by Suri on 3/29/13 - 4:44 PM

  

  Morton, you pose a very relevant question. After examining some secondary data from different sources including census data, it became apparent that while our sample of business owners did accurately represent South Florida Hispanic business owners, our sample was better educated and earned more money than the average US citizen and the average Florida resident.
  Regarding financial planning struggles, this is something that definitely affects the general population. In fact, in 2008 President Bush established an advisory council to increase the financial literacy of the Unites States population, and more recently, President Obama has also established a similar council inorder to better educate the general public on matters pertaining to their finances and their future. However, while this is a widespread problem, it seems that certain ethnicities struggle more, as their culture impacts their financial decision making processes.
  It would definitely be interesting to run this study in other parts of the country with different ethnic groups to see how the results would compare.

• #7 by Juan B on 3/30/13 - 6:42 PM

  

  This is a fascinating study. Thanks so much for the information. I'd really be interested in a followup explaining how this data compares with the general (non-Hispanic) population. I'm also interested in knowing if there is any correlation between cultural norms of Hispanics vs. other American minorities or social groups that can be sited as a causal factor towards lack of fiscal foresight.
  
  As a young Hispanic entre panure, I'd also be interested in how we as a community can better leverage our influence to attain legislation in our favor. Perhaps more studies like these will help raise communal awareness. That is an important first step.

• #8 by Suri on 3/30/13 - 9:57 PM

  

  Hi Juan B. I agree, this was a fascinating and eye opening study, and I am glad that as a young Hispanic entrepreneur, you found it interesting. You pose some great questions. Do you have any ideas as to what may be some factors that influence the fiscal foresight or financial literacy of Hispanics?
  As a side note, I am working on publishing this study and hope that it will help raise communal awareness on this very important topic.
  Thank you again for your thoughtful response.

• #9 by maxwell on 3/31/13 - 12:34 AM

  

  There is plenty of research out there that shows that individuals do not have enough set aside for retirement. In my understanding of retirement planning from an insurance point of view, many older generation individuals do not trust or believe in these systems. Many think that insurance companies rip people off. Properly demonstrating the financial need and proof through questions can show these individuals what their needs are and if they match up with their understandings. Saving for retirement is essential and the sooner individuals start the easier it is to build a nice large nest egg to use when they retire.

• #10 by Suri on 3/31/13 - 6:26 PM

  

  Thank you Maxwell for your insightful post. I agree with you that trust (and the lack of trust) is a big contributor to adequate retirement planning. How to successfully increase the trust in financial planners and the financial system is a key question that does not have easy answers.

• #11 by Jacob on 3/31/13 - 10:27 PM

  

  I enjoyed reading this posting. I'm actually not surprised to see these statistics. I don't know how different it would be from the Hispanic community where i'm from in California. I'm sure they are very close. Being a Hispanic, I can tell you first hand that me and my family fit directly in these statistics. I would like to know how many of these Hispanics have an education of any kind because I know most of the Hispanic population where i'm from is uneducated. The biggest surprise to me was the 3rd generations average employees, but it all makes total sense of why the 3rd generations employee count would raise.
  Great article and I agree with Juan B that more studies like this will raise communal awareness is an important step.

• #12 by Alex Paez on 4/2/13 - 8:54 PM

  

  Great research, and I definitely can include myself in this group of Hispanic people struggling with proper financial planning . I was wondering if there was a difference between the three generations on how they rated in their understanding of financial products and services. As you go through the generations, is their knowledge getting better or worse? For example, does the 3rd generation have a better understanding of financial planning than the 2nd, and the 2nd better than the 1st?

• #13 by Suri on 4/2/13 - 9:52 PM

  

  Hi Jacob,
  Thank you for your post and glad you liked the article. You asked about the education of the respondents in our survey.
  Our respondents included well-educated men and women, with 73% containing a bachelor’s degree or higher. In fact, 22% had a graduate degree. In addition, more than half the owners had a business that generated a revenue of greater than 500,000 a year and a personal income of greater than 100,000 a year.

• #14 by Suri on 4/4/13 - 1:22 AM

  

  Alex, you pose a great question regarding differences in how the different generations differed regarding their understanding or knowledge of financial products and services. In fact, there were differences, but they were not necessarily what one would expect. In general, the knowledge level of 1st and 2nd generation owners were similar and significantly higher than 3rd generation owners. More specifically, 2nd generation owners felt the most confident in selecting investments, felt most satisfied with their current financial situation, and were more knowledgable when it came to succession planning, business asset protection, and retirement planning as compared to third generation business owners. Any thoughts as to how to explain these results?

• #15 by Southwest Heating & Cooling on 4/11/13 - 7:29 AM

  

  Thank you for publishing your article. It has been of great help to me. Will visit your blog again.

• #16 by Suri on 4/11/13 - 10:00 PM

  

  Thank you for your positive post, Southwest Heating and Cooling. I am happy that my blog was helpful to you.
  Stay tuned for more!

• #17 by nancy on 6/25/14 - 7:50 AM

  

  The information you provide is useful and very valuable to me. Currently I see financial education and develop myself in the financial sector. I'm a follower of your articles. Good work.
  
  Sincerely Yours.
  Nancy Rose.

• #18 by Yusley on 9/2/16 - 6:41 PM

  

  This article raises a great and important point for Hispanic business owners. I believe that the lack of knowledge makes many business fail and owners feels discourage. Financial responsibility is a crucial subject to be informed about on many levels. The failures of this business owners can affect the community all around.