By: James Pérez Foster Issue: Vision Section: Business
A Visceral-Based Approach
When looking through the statistical lens of demographic trending, we find a U.S. Hispanic market, north of 50 million individuals large and representing one out of every six Americans. According to the 2010 U.S. Census Bureau Survey, by 2050, one out of every three Americans will be of Hispanic-decent. Is this a statistical anomaly, or bona-fide mega trend that will shape and define new corporate DNA, retail strategies and consumption behaviors?
Goldman Sachs recently wrote; “The Hispanic market growth is the most meaningful demographic shift in the U.S. Economy since the Baby Boomer Generation.” The Census Bureau also acknowledges not only the Latino population growth but recognizes that it now represents the fastest growing small business segment in the U.S. economy with over nearly $50 billion in annual capital requirements and a hiring source to a vast unemployed market place. With U.S. small businesses now responsible for over 60 percent of new job creation over the last 10 years, we start to understand the opportunity and necessity to educate and incubate small business owners.
Washington D.C. has not only thematically embraced these growth markets, but it has also recognized that financial services firms can act as catalyst for small business growth and job creation. The global economic landscape has heightened stakeholder demands among the larger global financial institutions for increased transparency and more focused efforts on community regeneration and socially responsible capital deployment initiatives. With the phased rollout of the Dodd-Frank Wall Street Reform & Consumer Protection Act, there are now mandated Community Reinvestment Act (CRA) requirements among U.S.-based OCC and FDIC chartered banking institutions. Additionally, the new CRA requirements place a particular mandate on these institutions to establish and/or increase their efforts towards accessing under-recognized, minority and socio-economically diverse demographic markets. As these institutions evolve their underwriting credit criteria, banks in general will seek CRA credit and minority-market access and educational platforms via capital investment and joint venture opportunities. For some financial institutions, donating money towards an annual community-based financial literacy event may suffice alone but for others, the need to support, advocate and advance the under-recognized, is to also incorporate these priorities into the DNA of an organization.
Financial services companies of all sizes are quickly evolving their marketing and access strategies to court the country’s diversity markets by distinguishing their marketing preferences, as well as social, consumption, and spending behaviors. While some term and often rebuke reference to the immigrant-centric profile of the U.S. population as a “melting pot”, many now opt for the more contemporary description of immigrant societal integration as a “mixed salad” by maintaining their cultural heritage and belief systems. One thing for certain is that the U.S. minority markets are requiring a more tailored, authentic approach that can be achieved though focused community mobilization.
Examining the unprecedented growth within the U.S. Hispanic market alone, 2010 U.S. Census data now confirms a demographic market with $1 trillion in household purchasing power. This market, containing geographic, socio-economic, linguistic and religious diversity defines a highly segmented opportunity, each requiring an approach defined by authenticity and cultural relevance. A culturally effective approach considers the subtleties and nuances of a fluid and highly dynamic changing immigrant profile. One of many proven channels of success focuses on the micro-leadership circles within community-based centers. Migrant and non-migrant markets habitually rely on community and faith-based resources for information and direction cues. Effectively courting the leaders within these markets begins with the understanding that a grassroots and cultural approach can add credibility to a “message” and significantly shorten the closing process. The scalability of a financial services firm is effectively enhanced when achieving “buy-in” and support from community leaders who ostensibly place their endorsement behind a corporate community initiative. With the foundation of a trusted relationship in place, “messaging” within these community centers can include: Initiative led education and literacy programs, awareness programs and access to specific target markets through the empowerment of key “ambassador” community members to support on-going initiatives.
The impact achieved through measured and meaningful community mobilization is often times, a more receptive and ultimately more reactive target audience. For me, as a former Wall Street portfolio manager, I saw the economic viability of the diversity markets and turned it into a personal crusade to make a difference in the world. How could I ever forget my second month on the job as a wide-eyed freshman with Merrill Lynch’s Private Client Group in New York City? With our professional development training managers encouraging us “newbies” to focus our target market efforts on professional segments that felt accessible to us, I spent my first couple of weeks focusing on cultivating financial advisory relationships with doctors. My parents both being doctors, this felt like a natural hand-in-glove scenario, until I quickly realized that doctors, for the most part, were only available to speak for the 30-seconds they had in-between patients. I knew I needed something deeper than commercial-length conversations. I sought to build meaningful relationships with my clients and I opted for a more general demographic target. Being the grandson of both Dominican and Cuban immigrants my mother and grandmother, had instilled into our family a rich exposure to Latino culture and heritage. While vast in its segmentation and dynamic fluidity, I felt that tapping this historically under-recognized market from the perspective of Wall Street was worth trying. But culturally speaking, I had much to learn.
At Merrill Lynch, I quickly came to know a senior financial advisor who had focused his portfolio on Hispanic-owned businesses. Having an early collegial relationship with him, I sought his advice. Jorge sat me down and explained to me that if I was truly directed to work with the Hispanic market, than I would have to expect a different type of client courtship process. I would come to expect and experience a visceral-based, relationship with my clients that didn’t always materialize into closed business right away. But rather, with the proper invested time, with coming to know my prospects at near-familial level, I would blossom these prospects into long-term and trusted financial relationships.
As a living tribute to my now, late-grandmother Patria, my wife and I moved to the Denver Metropolitan market to found the first national Hispanic-focused commercial bank in the United States—Solera National Bank. The bank, originally founded as Patria Corporation became a city-wide cause marketing campaign to embrace and ultimately solve the economic, financial and education gaps with a financial banking solution. The ownership of this new bank, and eventual accountability for the bank’s early success, was within the community in which it now serves. It started with coffee meetings, literally hundreds of meetings with area executives to proactively solicit feedback for bank concept. Individual meetings then led to larger town-hall meetings, four to be exact, that were conducted more similar to a focus group setting, while playing the role of educator and provocative cheerleader. Culturally speaking these sessions achieved something far more important than just buy-in, but rather me showing a token of my respect to my new Denver community that this bank also belonged to them. Alas, a community awareness initiative that quickly became a cause-driven campaign to fill that gap.
Once a sole passion project, the proposed bank became a shared vision of a dedicated 25-person organizer group—a group of impressive community leaders including lawyers, CEOs, retired bankers and teachers who rode with me through the ebbs, flows and intricacies of the national and state banking regulatory process. Our group came to obtain its conditional approvals from the federal government in 2007, and as such, became the first national banking charter in the state of Colorado in over seven years. At the same time, Solera National Bank became one of the first Hispanic-focused national banks in the U.S. The incumbency of our organizer group fueled a grueling, but thrilling capital raise process that raised the bank over $25M in capitalization in only a few short months. The mammoth proposition to the Denver community was a bank whose ethos centered on the fundamental truth that a single bank could change the lives of its community members—one individual, one family, one business at a time.
I spoke to Patria every day on my long drive to the bank. She became a beacon of light and a rainbow of positivity through the triumphs and hardships within the bank opening process. Embedded into me everyday was her simple message to stay positive, knowing that once opened, the bank would be changing the lives of individuals who once felt overlooked and ignored. The bank would serve as a touchstone to a demographic of hard working Hispanic individuals who shared the same financial goals as any other segment of our economy—the affordability of a child’s educations, the ownership of a home, and the financial dignity of retirement. This is what drove us to open and succeed.
Patria passed away one month after the bank opened at the young age of 98. Her elegance and soulful message carried me through, and laser targeted my sights on dedicating a career to the cultivation and advancement of U.S. Diversity Markets. The difference? I now understand that to authenticate my approach to these markets requires community activation, subtlety, cultural sensitivity and patience. The reward? The earned loyalty of a client as they evolve through the maturation of business and personal net worth growth.
While the banks’ founding certainly serves a regional good, it is only one example of many who deem the U.S. Hispanic market not only a viable one, but a powerful one. It is the group that is 50 million strong and now represents 53 percent of all births in the U.S. economy. With more than one-third of the nations Hispanics being under the age of 18 years old, it is an exceptionally young demographic that will come to shape and influence the future of retail, finance and politics. This segment of “future decision-makers” provides an opportunity for financial companies to court, cultivate and educate this young segment market into loyal, long-term customers.
Diversity Capital Markets seeks to embrace the differences, not the similarities in Hispanic-owned businesses, and correlates a culturally relevant courtship to this virtually untapped market. The viability of the U.S. Hispanic market will continue to evolve and impact the consumption demand and purchasing behaviors of America’s largest ethnic population and one that is growing five times faster than the general market, according to the US Census Bureau. And, with Hispanic consumers demanding more authentic ethnic services and product in more locations, corporate America is rushing to high-density Hispanic neighborhoods to comprehend and ultimately access the markets’ cultural nuances and trends. Companies are revamping conventional marketing approaches and tailoring delivery systems to a market that at its core, may only share the Spanish language in common.
The U.S. Hispanic markets’ composition constitutes members from the countries of Latin America, the Caribbean and Spain, yet the market’s domestic diversity includes variations and differences; nationalistically, linguistically, religiously and most importantly, culturally. According to the book, Hispanic Marketing: A Cultural Perspective by Felipe and Betty Ann Korzenny, “The glue that binds Hispanics together is a shared background of beliefs, values, perceptions, and orientations derived from a common experience harkening back to the Spanish colonization of Latin America.” This demographic market, with its unprecedented growth has certainly caught the attention of conventional capital sources like regional and community banks, and has now caught the eye of unconventional capital sources like private equity and venture capital. Capitalists embrace the magnitude of the demographic trend and continue to seek investment and approach strategies to court the often misunderstood, and highly segmented U.S. Hispanic market. Hispanics now represent one of the fastest small-to-midsize business growth sectors in the U.S. in industries including media, pharmaceuticals, oil & gas, retail, financial, and food services. Each industry has complex capital and growth requirements but it is the underlying approach of capital markets to earn and maintain the most profitable, long-term relationships.
Understanding that small businesses are a catalyst to necessary job creation, financial services giant, Goldman Sachs and its 10,000 Small Business Program is a noble example of bridging the gap between Wall Street and Main Street. The nascent program exemplifies the importance of community education for unlocking the potential of small businesses. The $500M program launched in 2009 deploys a rigorous educational process through community partnerships with Babson College and LaGuardia Community College. Integrating financial deployment partners such as Seedco Financial Services, Goldman’s program is sending a strong message to its industry counterparts that when small businesses and their owners are given the right tool sets, coupled with time-invested financial guidance, the scalability of today’s small business owners is exponential. The 10,000 Small Businesses Program is expanding its educational incubation programs into other key national markets including New Orleans, Chicago, Los Angeles and Houston.
With so many small business growth markets, we also find the genuine efforts of other for-profit and nonprofit organizations inspiring and educating the next wave of entrepreneurial leadership. The effectiveness of microfinance organizations has long been touted by its most visible spokesperson, 2006 Nobel Peace Prize recipient Muhammad Yunus, economist and founder of Grameen Bank. Also known as the “Father of Microcredit,” Yunus and Grameen Bank became an early template for issuing small financial credits to low-income entrepreneurs to help clients establish creditworthiness and financial self-sufficiency.
Today, the microfinance industry has blossomed with thousands of registered Micro Finance Institutes (MFIs). In Denver, Colorado under the stewardship of an exemplary founding team and supportive board of directors, the Rocky Mountain MicroFinance Institute (RMMFI) provides lending, education, and ongoing coaching to grow Denver Metropolitan entrepreneurs and their businesses onto a pathway of sustainability and self sufficiency. The success of RMMFIs nonprofit business model beholds the importance of not only the acumen and passion of those behind it, but a city and its diverse communities that has rallied behind the entity in the form of pledged gifts and volunteerism. While some conventional lending institutions are doing a better job than others, the flow of capital to existing, cash-flowing companies has been contracted substantially. Small businesses now look to non-conventional sources of capital like private equity and venture capital to fund complex growth and operating capital needs. Within the current economic contraction, varied capital providers are playing an increasingly larger and more meaningful role in stimulating business growth within diverse industry sectors as well. Whether the passion of a single entrepreneur who solely sought to make a small difference, or the collective will of a community to provide the incubation tailwind of our nation’s diverse small business markets, the opportunity is not only vast, it is paramount. Serving as a critical stepping-stone for the nation’s economic recovery and job creation stimulus, diversity ownership of our country’s small business segment must be addressed with cultural specificity and consistency.
James Pérez Foster is Head of Capital Markets for touchPoint Partners, based in Boulder, Colorado. In his current capacity, Pérez Foster heads research and capital & donor fundraising initiatives for global clients including Geneva Global (Social Impact Fund), National Geographic and StarShine Academy. The firm, specializes in fundraising, cause marketing awareness campaigns and corporate social responsibility (CSR) program design and implementation for socially purposed enterprises.