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High Net-Worth Households: Cultural Insights on Investing Approaches

This study delves into the investment behaviors of high net-worth households from different racial/ethnic backgrounds. Analyzing financial socialization, decision-making influencers, and learning preferences, it offers valuable insights for financial professionals, educators, and individuals.

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High Net-Worth Households: Cultural Insights on Investing Approaches

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  1. How Different Cultures Approach Investing Tahira K. Hira – Iowa State University Caezilia Loibl – Ohio State University Tom Schenk Jr. – Iowa State University

  2. Objectives • Analyze characteristics of high net-worth households by racial/ethnic groups • Explore patterns of financial socialization • Determine primary investment decision makers • Identify Adult Learning Preferences & Investment Information Sources

  3. Background • Financial Socialization • Parental Involvement • Financial role-models • Financial decision makers • Sole decision • Joint decisions with spouse or others • Learning Preferences • Investment sources • Learning Preferences

  4. Procedures • Households with annual incomes greater than $75,000. • Identified four racial and ethnic groups: • Whites, Blacks, Asian/Pacific Islanders, Hispanics. • 911 Telephone interviews between 10/05 and 2/06. • National Stratified Random Sample • Average interview time: 22 minutes.

  5. Demographics: Race & Ethnicity

  6. Demographics: Gender

  7. Demographics: Married

  8. Demographics: Household Size

  9. Finances: Debts, Assets, Debt Ratio

  10. Financial Socialization • Similar findings among ethnic groups: • Lack of parental discussion of money • Strong recollection of parental concern over money. • School teachers have minimal impact. • Strong parental influence on financial knowledge. • Exception: • Asian parents were most likely to discuss the importance of savings.

  11. Perceived Childhood Financial Security

  12. Making Financial Decisions

  13. Investment Information Sources

  14. Learning Preferences

  15. Summary - similarities • Little perceived influence from parents and teachers. • Respondents perceived financial insecurity as children. • Joint (with Spouse) investment decisions. • Strong desire to learn. • Less likely to use radio, classes, and investment clubs.

  16. Summary - differences • Asians were more likely to feel financially insecure as children. • Asians less likely to use financial advisors, more internet/TV users. • Whites are less likely to find seminars helpful and less detail oriented.

  17. Implications • Individuals: • Discuss money management with children. • Financial Professionals: • Minorities under-utilizing financial advisors • Discount brokers • Educators: • Adults are typically willing to learn. • High-tech media is not being employed.

  18. Future Directions • Determine causal relationships • Longitudinal study • Enlarge sample size • Cohort Analysis

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