Why do we do what we hate? Like in the biblical conundrum posed in the Apostle Paul’s letter to the Romans, where he questions why we sin even though we don’t want to, investors seem to know how they want to manage their money but often do quite the opposite.
Roper Public Affairs polled 1,001 Americans in October about their financial values–with a supplemental sampling of 1,275 Asian-Americans, African-Americans and Hispanics–for Allianz Life Insurance of North America in Minneapolis.
In the study, Asian-Americans and Hispanics placed a higher priority on education, while African-Americans worry more about paying down debt than the general population.
But it was the similarities among the demographic groups, not the differences, that stood out most, said Mark Zesbaugh, Allianz’s chief executive. On some measures, their answers were uniformly alarming.
More than two-thirds of the group rated themselves as financially successful, while at the same time 39 percent admitted they are not at all or not very prepared for a financial emergency.
Fewer than 30 percent feel confident in their ability to make the right decisions when completing personal finance tasks like managing discretionary spending, buying life insurance or saving for a child’s education.
Only 17 percent said they believe “owning nice things” tells the world they have made it–even as U.S. consumer debt mounts to record levels and we drown in MP3 players, McMansions and sport-utility trucks selling above $50,000.
“The fact that so many people feel they are a financial success [despite the reality of their behaviors] makes me wonder if they have really figured out their situation and what they’re going to need in retirement,” said Zesbaugh. “It seemed like an awfully high confidence rate.”
This overconfidence breeds disdain for worrying much about life insurance, which is why companies like Allianz are scrambling to unlock our financial trigger points. How do we define success? Is it important for someone selling investment products to match our ethnic background? How important is it that you leave money to heirs or causes?
“People are worrying more about living too long than dying too soon,” Zesbaugh said. In the study, respondents placed a high priority on leaving money to heirs, yet nearly three-quarters are worried they will outlive their income.
As immigrant and minority populations grow, more financial-services companies are trying to bridge this disconnect between reality and financial fantasy by reaching audiences with more tailored marketing messages, said Gary Smith, senior partner with Ivy Planning Group, a consultant to Allianz and other firms on cultural marketing.
“There are significant differences in how [different ethnic groups] want to be approached and in the way they make buying decisions,” Smith said. “Just one example is how some insurance companies used to not allow representatives to make sales calls after a certain hour in the evening. Then they learned Asian customers typically respond much better to a highly personalized sales visit late into the night.”
Of course, there is a huge danger of overgeneralizing any particular group, and these studies need to be put in context, notes Marie Albarracin, marketing vice president for Ethnic Marketing Associates in Bernardsville, N.J. The consulting firm was not involved in the Allianz study.
Survey respondents ages 45 to 64 had high median incomes ($69,500) overall, and the ethnic group samples were even wealthier. The Asian-Americans had median incomes of more than $81,000, and the other two minority groups’ median incomes were $71,000.
The higher incomes could play a role in the minority groups’ relative low priority on the cultural background of a financial adviser, Albarracin said. About three-quarters of the minority group indicated it didn’t matter whether the person they dealt with at a financial institution was of the same ethnic background.
“I wouldn’t allow this to tell me that ethnicity doesn’t matter across all cultures,” she said. Wealthier minorities, perhaps, are more likely to be accustomed to dealing with the mainstream economy, she said.
Possibly it is yet another example of investors saying one thing but behaving much differently.
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Major money worries
Percentage of Americans who say they are “very” or “fairly concerned”
84%
Saving for retirement
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84%
Inflation impact on income/savings
73%
Paying for health-related problems
64%
Having too much debt
57%
Payments for rent/mortgage
32%
Paying for kids’ education
Note: Survey of 1,001 Americans 45 to 64 with annual household incomes of at least $45,000.
Source: Roper Public Affairs
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