Cultural Competency: Understanding More about Clients’ Values and Beliefs

By Miranda Reiter

Understanding your clients’ culture can help you to become a better financial planner. Clients’ ability to communicate issues and adhere to your recommendations could likely improve in direct relation to your level of cultural competency. Moreover, research suggests that clients respond more positively and rate professionals as more capable when they are culturally competent.¹

Cultural competency is becoming more important as the country becomes increasingly diverse. In the U.S., it has been projected that half of all Americans will belong to a minority group by 2044.² By 2065, Black and Latinx (i.e., Latina/o, Hispanic) individuals will make up nearly 40 percent of the country’s inhabitants. The Asian population is the fastest-growing ethnic/racial group and is expected to surpass 46 million inhabitants in the U.S. by 2060.³ The only racial group that is expected to decline is that of non-Hispanic Whites.⁴ In the financial planning profession, it’s likely that the types of consumers who seek financial advice in the future will increasingly come from diverse backgrounds as the economic realities of underrepresented clients and prospects improve.

How can financial planners improve their cultural competency and apply it in their practices?

Culture and Money

To understand cultural competency, it is important to first understand the meaning of culture. “Culture consists of the shared beliefs, values, and assumptions of a group of people who learn from one another and teach others that their behaviors, attitudes, and perspectives are the correct ways to think, act, and feel.”⁵ Culture affects values and beliefs around money, and it affects financial decision-making.

Here are a few ways that culture can affect attitudes around money. Research shows that, compared to White consumers, Black consumers are likelier to give a higher percentage of their income to family and church. Hispanic consumers are more likely to view their extended family as a substitute for purchasing a traditional life insurance policy. For some immigrant families, remittances—payments back to loved ones in their home country—are a nonnegotiable item in their budgets. For other cultures, taking care of older and extended family members at home, rather than in a facility, is an expectation, and it may seem disrespectful to suggest otherwise.

Cultural Competency

It isn’t enough to just be aware of cultural differences; advisors need to develop cultural competency. Cultural competency can be described as “the ability of individuals and systems to work or respond effectively across cultures in a way that acknowledges and respects the culture of the person being served.”⁶ Think of it as an awareness that culture influences our thoughts and behaviors relative to others. Cultural competency helps us to understand, communicate with, and effectively interact with people across cultures.⁷ When we translate these benefits to financial planners, cultural competency is effective in building bonds and facilitating trust with clients.

Five Practices for Learning More about Your Clients’ Culture

So how can you learn more about your clients’ culture(s) so that you can understand more about their values and money beliefs? Here are five ways to become more culturally competent to better serve your clients.

1. Be willing to engage in the process.
Engage in the process of truly learning and exploring culture. Becoming culturally competent is not an easy process. It requires admitting that you have room to grow in terms of learning about and communicating with others. It requires being open and introspective, as well as facing your own biases. It is a long-term, continuous commitment. 

2. Know your own culture and get to know your clients in the context of their culture.
The more we can get ourselves to understand that culture starts with us and it’s not just “different” people who have “different” cultures, the better off we will be. We all have culture, even if we have not yet consciously explored that idea.

Get to know your clients in the context of their culture. How did they grow up? Did they grow up talking about money in their household? What were their first experiences or memories with money? You might ask, “Share with me your parents’ views of money as you were growing up.”

You also could ask who is important in their life without defining specific relationships or labels. What is their perspective on trust and financial institutions? Are they a first-generation financial planning client? What are their family’s values? Is it important to involve certain loved ones in the financial planning meetings? How does extended family factor into the importance of their financial plan? Learn how their family goals differ from—or align with—their personal goals. These are just a few examples, but there are many other enlightening questions that will allow you to learn more about your clients’ cultures.

3. Acknowledge your clients’ beliefs, behaviors, and values.
Acknowledging your clients’ beliefs, behaviors, and values requires understanding historical and contemporary realities of their culture. It is generally best that you obtain information about an individual’s culture directly from the individual you are serving, rather than relying on what you think you know. It means that you will likely ask more open-ended questions to learn critical things about your client that may affect their financial well-being, their trust in you as their advisor, and, ultimately, their relationship with you and your firm. 

4. Build rapport.
There are many ways to build rapport with clients. Two common approaches include having conversations to get to know your clients better and hosting client social events. There are a few things to pay attention to here as it relates to cultural competency. First, listen to people tell their stories and demonstrate respect for culturally related strengths. Money mindsets could be very different, and your role is not to judge them as “correct” or “incorrect.”

At the same time, you will likely offer guidance to your clients frequently during your financial planning relationship. When you do, be careful to avoid using analogies that may not stick, such as the all-too-common American sports analogies, or imposing rule-of-thumb financial rules on clients with different cultures. Their priorities may be different, and these clients may need other options. For example, assets may need to be diversified across borders—what does retirement look like for someone like that? Do they want all their money in mutual funds, or is cash required to buy property in another country? Advisors should understand clients’ goals and be willing to suggest more than one possible solution.

When hosting client events, try to ensure that all clients will feel welcomed. Most likely, your events have been geared toward a certain type of client and culture. How can you make your events more inclusive of a broader range of clientele so that all clients are comfortable?

5. Incorporate cultural values into the financial planning process.
Incorporate cultural values into the financial planning process. This often means helping your client develop a plan that allows them to exercise their values while still achieving financial security. It also means that you don’t coach clients to break their social contracts.

It might make sense to evaluate the methods you use to obtain data and assess certain measures, such as risk tolerance. Do your current processes and instruments make sense for all of your clients? Do they take diversity of cultures, languages, knowledge, backgrounds, and experiences into consideration? Are they truly effective at assessing the variables or capturing the data you are interested in when working with culturally diverse clients?

Financial planners do a lot to help clients achieve important goals every day. Taking the additional initiative of understanding more about your clients’ values and beliefs through the lens of culture can help you stand out from the rest. Dare to become a better financial planner by incorporating cultural competency into your practice.

[1] Constantine, M. G. (2001). Predictors of observer ratings of multicultural counseling competence in Black, Latino, and White American trainees. Journal of Counseling Psychology, 48(4), 456–462. https://doi.org/10.1037/0022-0167.48.4.456
[2] Colby, S. L., & Ortman, J. M. (2015). Projections of the size and composition of the U.S. population: 2014 to 2060. U.S. Census Bureau. https://www.census.gov/content/dam/Census/library/publications/2015/demo/p25-1143.pdf
[3] Budiman, A., & Ruiz, N. (2021). Key facts about Asian Americans, a diverse and growing population https://www.pewresearch.org/fact-tank/2021/04/29/key-facts-about-asian-americans/
[4] Insurance Journal. (2018, March 14). U.S. population trends: Elders to outnumber youth; More ethnic, racial diversity. https://www.insurancejournal.com/news/national/2018/03/14/483198.htm
[5] Schein, E. H. (2010). Organizational culture and leadership (Vol. 2). John Wiley & Sons.
[6] Williams, B. (2001). Accomplishing cross cultural competence in youth development programs. Journal of Extension, 39(6), 1-6. https://archives.joe.org/joe/2001december/iw1.php
[7] Hofstede, G. J., Pedersen, P. B., & Hofstede, G. (2002). Exploring culture: Exercises, stories, and synthetic cultures. Nicholas Brealey.

Dr. Miranda Reiter, Ph.D., CFP^®, is an assistant professor in the School of Financial Planning at Texas Tech University. Her research explores issues of diversity, equity, and inclusion in the financial planning profession and consumer financial behavior.

image credit: istock.com/Angelina Bambina