The number of wealthy Asian Americans and Pacific Islanders is on the rise, but the demographic has unique financial planning needs that the industry has traditionally ignored.
That's the premise of a new study, "Diverse Viewpoints: Exploring Wealth in the AAPI Community," published
"AAPI individuals represent a disproportionate share of the affluent population in the U.S … at 10%, but when it comes to financial services, the community has been historically underserved," the report authors wrote. Asian Americans account for around 7% of the U.S. population, and Native Hawaiians and Pacific Islanders about 0.5%, according to
The Merrill study found that AAPI individuals feel more pressure than their peers in the broader affluent population to financially take care of both immediate family members and extended family abroad. They are also more likely to prioritize their children's education as a financial goal and are more interested in estate planning than the average American of similar wealth.
"AAPI are two to three times more likely to feel obligated to financially assist aging parents or support family members in another country," the report authors wrote. "However, while this responsibility is seen as a core part of their identity, it's also a source of financial stress, with many describing it as a worry that's top of mind."
AAPIs are a highly diverse group originating from "approximately 50 ethnic communities from more than 40 countries around the world," the report authors wrote. But they often share common themes in their wealth journeys — including a strong sense of financial obligation to family, a desire to prioritize stability and an attitude of self-reliance.
"The study is the latest example of our commitment to explore and better understand the diverse experiences and financial paths of the communities we serve," Andy Sieg, the president of Merrill Wealth Management, said in a press
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AAPI individuals also prioritized paying for their children's education above other financial goals like saving for retirement, the study found. While only 11% of the general affluent said paying for their children's education was a top financial priority, 16% of AAPI respondents prioritized it, a Merrill spokesperson said in an email.
Just about "every AAPI client that I have, including my own family, will start a college fund for their children before starting a retirement fund for themselves," Khimani said in an interview. "Education is their number one priority."
This comes from cultural norms of seeing education as the family's ticket to success in a country many AAPIs have perceived as meritocratic, Khimani said.
"Commitment to family is huge. … We think about how we are to set up our kid financially for the rest of his life" by prioritizing education, Tina Cheng, a director of strategic growth markets at Merrill who oversaw the creation of the report, said in an interview.
Cheng, who identifies as Asian American, said that many AAPI clients care about "making sure that our parents can retire comfortably."
AAPI respondents were also 25% more likely than the general affluent respondents to say estate planning was a priority in their financial plans.
"Many Asian Americans are kids of immigrants who may not have been able to have their parent's wealth passed down to them. This generation is the first large group to be able to accumulate wealth," Margaret M. Chin, a professor of sociology at Hunter College and The Graduate Center at CUNY, said in an email.
"Moreover, many immigrant parents may not have access to Social Security or any retirement accounts because of the kinds of work or immigration status they had," Chin said.
This makes the affluent second generation their expected
The study also found that AAPI individuals are more risk-averse as investors, avoiding debt more than the average affluent American, and preferring tangible investments like real estate. They also prefer to live frugally, educate themselves on finances and gravitate toward well-known brands, large financial institutions and advisors with proven track records.
"AAPI affluents rely heavily on word of mouth. So advisors must keep in mind that one loyal client can lead to many, many more clients," Khimani said.
This behavior reflects, in many cases, a background of financial or social instability in their home nations and the financial disruptions of immigrating, the report authors wrote.
Financial advisors can factor this into their work with AAPI clients, Chin said, by asking them who and what they're saving for. They could recommend "less risky prospects for their parents, more riskier, long-term investments for their children."
In addition, Khimani said, rather than getting defensive when AAPI individuals ask the advisor to explain why they charge fees to manage assets, advisors should take the opportunity to explain all the ways working together can benefit them.
"Understand their desire to save more," she advised. "Cost is an issue in the absence of value."
Finally, while older Asian Americans were more likely to be entrepreneurs — due to historic discrimination that prevented them from entering many professions in the U.S., which led AAPIs to open their own business — younger AAPIs were markedly less inclined to do so, meaning advisors may need to have different planning conversations with an AAPI client depending on what generation they belong to. "As more career options are available for both American-born and younger generations, the desire for entrepreneurship wanes," the report authors wrote.
Ipsos, a market research firm, conducted the study online with interviews of 1,011 affluent AAPI Americans between September 2019 and May 2022. Half of the respondents were first-generation immigrants and the other half were American-born. Researchers compared their responses with those given by a representative sample of 1,000 individuals from the general affluent population in the United States. The survey focused mostly on the Chinese, Korean, Japanese, Filipino and Indian American communities.
These communities' stories of wealth "aren't as commonly shared," Cheng said of the individuals surveyed. She added that the report, while not fully representative of all AAPI experiences, demonstrates the firm's interest in growing its foothold with the group through outreach and engagement.
"We're here to hear the stories and to meet the community where they're at, just by understanding what it is that's a priority for them, whether it be family and legacy planning or saving for education."
