Lost in Translation
At the point when his dad retired, Destruge Sandoval had been in the retirement business already for about 17 years, and realized he had never once stopped to ask his dad whether he was saving, which made him feel very guilty. The experience became an inspiration to Destruge Sandoval to research how to expand services to the Hispanic population, resulting in the start of Diversified’s services for Hispanic participants back in the 1990s. “I wish I could have done this for my Dad, but now I know what we do makes a huge impact on many Hispanic employees,” says Destruge Sandoval, who has retired from Diversified since speaking to PLANADVISER.
At the time, Hispanic participant services were not commonplace—one could argue they still are not—but nowadays more providers and plan sponsors are aware of the need. “Since the 2000 Census, employers have realized that Hispanics are a large and fast-growing [population] segment,” Destruge Sandoval says. However, he adds, many employers are failing to make the connection that more is needed than identical English to Spanish translation.
“401(k)” doesn’t translate to Spanish—after all, it’s an American tax code that isn’t always familiar to other nations—which is why there is a growing recognition that educating the Hispanic population about retirement requires a cultural translation beyond literal language translation. Savings Gap
Racial disparities do exist in saving for retirement. An Ariel/Hewitt study released in July found that African-American and Hispanic participants contribute to their 401(k) plans at much lower levels than their white or Asian counterparts, leading to smaller average account balances even at higher pay levels. Although more than half (65%) of Hispanic employees participate in their company’s defined contribution plans, that is less than the 77% of white workers. Furthermore, Hispanic participants contribute less (an average 6.3% of income, compared to 7.9% of whites).
The result is that, at all pay levels, Hispanic employees have smaller account balances. For example, the study found Hispanic employees earning between $30,000 and $59,000 have an average account balance of about $22,000, compared to the $35,000 of their white counterparts. Furthermore, almost a third of Hispanic workers borrowed from their retirement accounts, compared to just one in five white workers.
The reasons for the disparities can be attributed both to how financial institutions reach out to employees, as well as the culture of some ethnicities, says Barbara Hogg, Principal at Hewitt Associates and co-leader of The Ariel/Hewitt study. “Often we have painted pictures of retirement to be very individualistic, or very focused on the individual and financial freedom…and that’s less appealing to some groups,” she says.
There are a lot of cultural dynamics that can make the relevance of retirement different to some groups, says Michelle Morey, Vice President of Communication Solutions at Prudential Retirement. For the Hispanic population, family is one important part of the retirement picture; there is a common tendency within the Hispanic community to take care of retired family members.
While putting a lot of trust in the family and workplace, Hispanic participants might have a natural distrust of financial institutions, due to government corruption in some Spanish-speaking countries. Some of that distrust has led to more conservative investing, such as investing a lot of assets in money-market funds, says Jennifer Plese, Vice President, Participant Services at Wells Fargo Institutional Retirement & Trust.Beyond Translation
The Hispanic population is the fastest-growing population in the U.S. Between 2000 and 2006, the Hispanic growth rate (about 24%) was three times the growth rate of the total population, according to the U.S. Census Bureau. In 2000, the Hispanic population in the U.S. was more than 35 million (or 12.5% of the population); the Census Bureau projected the number to grow to almost 48 million (or 15.5% of the population) by 2010.
Advisers say the growth of the Hispanic workforce is evident in the demand from plan sponsors for better service to this segment. Erik Volland, Manager, Employee Education Services at CAPTRUST Financial Advisors, says they have seen an increase in their call center of calls from the Latino population over time. “It’s a need that’s going to be increasing and needs to be addressed. I wanted to be more proactive rather than reactive about this service,” he says. CAPTRUST decided to hire an outside consultant specializing in Spanish language and culture, and, at the time of the interview, was preparing to unveil Hispanic education materials re-created with the Hispanic context in mind.
Volland cites a criticism many have with materials from the plan provider: They more or less translate the English version rather than getting behind the cultural aspects, thereby causing a hesitancy in the Hispanic population to save in the 401(k). For instance, many Hispanic participants might be going back to their home countries and saving for their families. “They’re very much family-focused….That’s critical and important to their lifestyle and their livelihood”—and to leave that out is missing a huge part of their culture, he says. One way to address this is to illustrate how participants can save and invest money and then take that chunk of money back to their home country.
Not only is the Hispanic population the fastest-growing, but it is also one of the least-served markets, says Diversified’s Destruge Sandoval. Previously, the segment was not a target market for many providers because of a “misperception that Hispanics didn’t have enough income to save.” Actually, financial concerns are very important to Hispanics; they just were not being informed correctly about their retirement options in their language, he says. “The issue is not going to go away. Those who respond first with the right approach are going to gain market share.”
Although most providers have not created whole Spanish participant services, they are responding to the need for Spanish-focused materials with some subtle differences to their education and enrollment materials. One trend catching on is the principle Wells Fargo refers to as “transcreation,” or going beyond translation to look at delivering the message in a way that is meaningful to the audience, using the correct imagery and colors. For instance, the imagery in Wells Fargo’s print materials focuses around family and uses vibrant colors. The concept is applied across all of Wells Fargo’s materials—in-person, print, and Web tools—in order to reach out to Hispanic participants.
While Plese says the Web is not yet a popular arena for the Hispanic group, the younger generations—Spanish-speaking or not—are gravitating toward the medium (see “The Young and Restless,” PLANADVISER July-August). Wells Fargo uses the Web as an educational tool; because of compliance concerns in the translation of investment-specific concepts, participants are directed back to the English-based Web site for transactions.
Destruge Sandoval suggests using audio, as some Spanish-speaking populations might not have a high degree of literacy but will listen to an audio presentation, such as a summary plan description, on CD. At Diversified, they also utilize photo novellas, a popular print medium in Latin America using pictures, in order to explain retirement concepts. “Employees can use a tool that they are used to [in order] to learn about something that they are not so used to…like financial planning, preparing a budget, saving for retirement, taking distributions in a foreign country—those are all issues that, if we present in a medium that the participants already know from their home country, they are more likely to read to the end without discarding it,” Destruge Sandoval says.
Morey notes that Prudential’s research found that Spanish-language materials are most relevant to lower-income Hispanic households. Households earning $35,000 or more are more bilingual, and English-language materials suffice; households in the lower-income segment are not fully comfortable communicating in English. Furthermore, Morey says Prudential found sponsors and participants did not want separate materials singling them out, and so Prudential created bilingual materials rather than two separate materials.
Another language concern worth noting is its variety of dialects of the diverse Hispanic population in the U.S. Destruge Sandoval says Diversified uses standard business Spanish in its materials, and indicates to the plan sponsor that the dialect might not be specific to regions the employees are from. He also suggests that educators mention upfront to participants that they might be speaking a different dialect.
In addition to creating materials in many forms, providers are making strides to target leaders of employee affinity groups, who typically hold a lot of sway over the other employees. At Prudential, Morey says they run plan advocacy programs that target the informal power network, which typically means influential employees in the business. “If that person can become the advocate for the plan and say to his peers, ‘This is a good thing to do,’ you don’t have to do anything more,” she says. She says they offer tools about how to train plan advocates in a way that respects the culture of the affinity group.
What Can Advisers Do?
In addition to recognizing cultural differences and disparities when
saving for retirement, as well as tools evolving in the marketplace,
here are some concrete strategies plan advisers can help plan sponsors
employ in order to help specific groups, such as Hispanic participants,
have adequate retirement savings:
1. Look at data. Being aware of demographic trends among participants
is a first step, says Hewitt’s Hogg. See what participants across
different segments, including Hispanic participants, are doing. Plese
says advisers can help by looking at the overall demographic trends,
such as where there is lower enrollment. Then, the adviser can sit down
and consult with the plan sponsor to determine the needs of the plan
and the best way to achieve those goals (see “Zooming In,” PLANADVISER
May-June).
2. Look at plan design features. In recent years, there has been a lot
of attention paid to behaviors of participants in 401(k) plans, so Hogg
notes that the next step could be what plan sponsors are doing
anyway—such as implementing automatic enrollment and contribution
escalations. Those actions are a good movement in the right direction
to benefit employees in race/ethnic groups falling behind on retirement
savings, she says.
Another suggestion from The Hewitt/Ariel Study is to modify loan
requirements to decrease the likelihood of default, such as: extending
the amount of time a terminating employee has to pay off a loan;
allowing loan repayments after terminations; or exploring new options
for allowing loans to roll over from one employer to another.
3. Formulate relevant communication. Advisers can help sponsors
overcome communication barriers that block Hispanics from saving for
retirement. Hogg contends that targeting based on race or ethnicity is
not the answer, as people with all motivations can be found in any
racial group (even though there are trends showing that people in the
same race or ethnicity have similar motivators). The answer, Hogg says,
is to have communication that appeals to a lot of people with different
motivators, sending a message through a “broad lens,” and then
targeting specific behaviors across all demographic groups.
Whether by using an outside consultant or leveraging the tools of the
provider noted above, advisers can help plan sponsors present more
culturally relevant education materials.
4. Reach out to affinity groups. Hogg notes one exception to targeting
based on ethnicity and race: leveraging affinity groups to encourage
leaders to promote financial wellness within their affinity segment,
such as Hispanic women. As providers say, sometimes the key is in
finding the ringleader that other employees look up to. By teaching the
leader about retirement, you end up teaching the whole group.
Morey suggests that advisers can help with this, whether through a
formal plan advocacy program or through picking up on who is the leader
during enrollment meetings. It is a good idea to take the time to
identify the informal power and use that to the plan’s advantage, she
says.
Through plan design and communication—and the coaching of advisers who
can use outreach to the Hispanic community as another selling point of
their services—helping the burgeoning Hispanic population save for
retirement is possible, sources say. “It doesn’t take a whole lot of
resources to culturalize education materials, but it does take passion,
and it takes a willingness to do what needs to be done in order to
cater to this population segment,” Destruge Sandoval says. “I wish that
my dad had worked in the post-2000 Census era and taken advantage of
education and benefit opportunities that plan sponsors and advisers are
making available to their diverse employees.”
Check out audio interviews with Diversified Investment Advisors and Hewitt Associates.