Q&A with Nuveen CEO Jose Minaya

next issue no. 11: On the horizon

Q: Why is it important to you and to Nuveen that we work toward closing the racial retirement gap?

First, the racial gap on the retirement side is deeply personal to me. I grew up as a first-generation Dominican Republican American in New York City in a home where two hardworking, loving parents weren’t investing in a 401(k). There were very few resources and little to no education available to us about the importance of retirement savings. This is true for far too many Americans.

When I entered the financial services industry nearly 30 years ago, I started to learn about these topics. It granted me the ability to see the importance of retirement savings in accumulating wealth and securing a happy retirement.

This is something that people just don’t talk about a lot within the Hispanic American community. Many engage outside methods, almost gray markets, when they think about saving. Your proverbial “money under the mattress” approach. That to me is a massive failure of our country and our industry. Here at Nuveen, we have the ability to address that need in partnership with members of that community.

Second, over the years I’ve come to realize that these issues represent a massive business opportunity for the entire financial services industry. If we think about the Hispanic American community on its own, the buying power is a massive basket of capital. That community represents nearly $3 trillion of GDP in its own right.¹ It is also a young population in the U.S., with a median age of 30, versus a median age of 41 for non-Hispanic Americans.²

If we can get our penetration rates for Hispanic Americans into financial services or retirement products to a comparable level to other communities, that is a massive opportunity from a business perspective. What if we lifted those engagement percentages to 30, 40, 50%? That would be a huge influx of capital into the markets, into our industry and the wider economy. This benefits all of us in the long run.

This is a critical moment for Nuveen and the broader financial services industry. It goes back to our underlying mission that we’re long-term asset managers. I look at this and it seems so obvious to me because there’s going to be a first mover advantage to tapping into these communities.

Q: What idiosyncratic factors affect retirement planning for the Hispanic American community?

There are several significant barriers affecting Hispanic Americans’ ability to effectively save for retirement. As a firm, we have to understand the different cultural nuances in order to adequately serve these clients. For example, the impact of remittances. I grew up in an environment where, especially for a lot of first-generation people, they’re regularly sending money back home. It’s part of the whole agreement of even coming to this country and trying to build a life here; you’re trying to lift your entire family. There are strong cultural expectations around that.

The TIAA Institute releases an annual Personal Finance (P-Fin) Index. It is a barometer of financial literacy based on a 28-question survey.³ Throughout the survey we saw that:

• 45% of Hispanic Americans are more likely to have difficulty making ends meet, compared to 21% of Asian-Americans and 25% of whites.
• 38% of Hispanics are debt constrained, compared to 17% of Asian-Americans and 22% of whites.

There’s also a culture around trust. When you look at how the entire financial services industry is educating clients and prospects, we are often guilty of presenting a “one size fits all” approach. This simply won’t work. Here at Nuveen, we have a Spanish-speaking sales desk dedicated to serving our Spanish-speaking clients. We are translating materials and creating materials in Spanish, but there is still a long way to go. So, we have to get better at examining the different demographics and asking ourselves, “Are we putting enough effort into truly understanding the communities we’re trying to serve?” We have to engage with a community in order to really penetrate it.

Q: What role does financial literacy play in finding a solution?

Financial literacy is an extremely important component of all of this and the different businesses across the financial services industry all have a part to play. The TIAA Institute P-Fin Index also found that Hispanic Americans answered only 38% of the questions correctly. Whereas the number for white Americans was 53% and for Asian-Americans it was 55%.

Education is key and to be effective, it must be tailored to specific audiences. Just as we cannot address individuals just entering the workforce the same way we address people who are near retirement, we cannot address Hispanic Americans the same way we address Black Americans. We need to be able to find creative ways to share what we do.

I often describe our business as a factory floor. The main job we have is to manufacture something that is going to hold its integrity. So, we have a bias toward educating because it helps drive the capacity of our factory floor. It’s why we exist. It is our central mission, and we want to be able to continue to cast that message in the broadest form possible.

There are overlapping layers of responsibility between us, plan sponsors and financial advisors in doing this. Helping our key stakeholders, namely institutions, participants and plan sponsors, ultimately helps us. It’s a symbiotic relationship. Additionally, we need to talk to leading financial advisors about why we believe in closing the retirement gap and the promise of guaranteed lifetime income. Those financial advisors can then share the message with their clients.

Q: What role does guaranteeing lifetime income play in solving this issue?

I describe guaranteeing lifetime income as the original promise of the retirement industry. We began with the concept of Social Security, then the concept of defined benefit plans and then, as the world opened up, plan participants were given a lot more choices. They began asking themselves a series of questions. What funds should they buy within their 401(k)? Should they sit inside the default option? How are those ideas and choices being compared? To me, the most consistent thing to keep asking is, what is the desired outcome of retirement?

Starting on the day they retire, participants need enough money in the bank to receive a stream of income that they can live on. That is a participant’s most basic need. All we’re doing is going back to the beginning and asking, how do we get people a level of certainty that they are guaranteed an income stream that they can count on to be there year after year? How can we ensure that people have enough in that income stream to be able to retire with dignity? This is what retirement plans were always meant to be and as a nation, that is the purpose that we have to rediscover together.

Q: What additional work is Nuveen doing with Hispanic American plan participants specifically? What impact does this have?

As I mentioned earlier, we have a Spanish-speaking sales desk available to our Spanish-speaking clients. We are also translating our written material into many different languages, including Spanish. Now we have to go beyond that.

We, as senior leaders, have to go on road shows and get out into Hispanic American communities. Many of our clients currently are Hispanic Americans so we have to make sure we are adequately supporting them and their savings goals. We can’t just translate materials from English to Spanish. We need specific people on our team that specialize in communicating with these participants. We’re asking ourselves, are we leaning into that culture and understanding that community? If we’re talking about the benefits of guaranteed lifetime income, we need to talk about it in a way that really resonates with that community.

When we go to open an office in Tokyo or Germany, we have to think about the community we’re entering. We can’t just send Americans there. We hire locals and lean on their expertise. We tailor product offerings and educational programs to those specific needs. It’s an obvious best practice. So why would we not do that with our Spanish-speaking clients within the U.S. as well?

Nationwide, more than 80% of Certified Financial Planners^® identify as white. Less than 3% identify as Hispanic Americans.⁴ We need more diversity across the financial services industry in order to meet the needs of these clients.

Building on that, the most important thing for us relates to how we get our products out to the marketplace. So, we’re asking ourselves, what can we be doing to create a better message? We need to get to know our clients and customers really well and tailor the message to them individually rather than having one monolithic message. Our factory floor is extremely good at manufacturing a widget, and that widget is guaranteed lifetime income. Yet that is not enough. We need to position ourselves so people see that it’s special and is key to securing a dignified retirement. We’re still learning how to do that, but we are extremely proud to be on this journey.

A recent TIAA survey conducted research into the Hispanic American population, with findings that highlight the need to better serve this community.*

The Institute found that:

• Only 60% of Hispanic Americans have saved any money for retirement, compared to 87% of Asian-Americans and 76% of white Americans.
• Only about one in four Hispanic Americans are currently contributing to retirement plans. For white Americans and Asian-Americans, it’s more than one in three.
• Even when employers offer ways to help save for retirement — such as employer matches — only 28% of Hispanic American employees have used those programs. The number for Asian-Americans, white Americans and Black Americans is about 40%.