The prolonged slump in U.S. real estate hasn't made Darius Michalski's clients more interested in stocks or bonds. They want to invest in property, gold and other tangible assets. Period.
Many "have two or three homes rented out and consider those monthly checks their retirement," says the Summit, N.J., planner, who serves several hundred Polish-American and other Eastern European immigrant clients with a net worth of $100,000 to $1 million. While Michalski, who works from an independent office of Cantella & Co., urges his clients to diversify, it's also clear he understands how hyperinflation or rampant corruption made them leery of financial markets. "A lot of them come from countries where everything collapsed, so they fear losing everything," Michalski says.
Such fears highlight the specific challenges faced by planners whose practices focus on clients from immigrant communities. Trust is paramount. Or, as Michalski puts it: "My immigrant clients are my children."
Planners say that, to serve wealthy immigrants, you'll need to provide family-style attention. "Our clients call us on the weekends and evenings," says Sanjeev Sardana, CEO of BluePointe Capital Management, a wealth advisory firm in San Mateo, Calif., that caters to the Indian diaspora.
"Nobody will give you money to manage if they don't know you," adds Naim Syed, managing principal at GHS Financial Group in Santa Clarita, Calif., who works with Pakistani-Americans and other Middle Eastern immigrants across the U.S. He spends six to seven weeks a year traveling to meet clients in person, and another five to six weekends a year at clients' family weddings, anniversary parties and other social events, even if he must fly to New York, Michigan or Texas.
The strength of the communities they serve keeps these planners on their toes. "If somebody's unhappy with us, everyone will hear about it quickly," Sardana says.
When he first meets a prospect, typically at a family event or charitable function, he knows his reputation comes with him. "There's probably a maximum two degrees of separation between us," he says.
Some of the prospective clients he meets have been burned by a financial planner in the past. "We are a fee-only firm because we found we could not do commission business and persuade our clients that their interests were on top," says Sardana, who charges fees based on assets under management.
In addition to attending more than a few weddings, many planners serving a large roster of immigrants do pro bono work, helping less fortunate members of their communities and local charities. "Middle-class, legal immigrants get lost in the system. I try to help them with green cards, getting mortgages and making investments," says Michalski, who, with his fiancÃ©e, Margaret Chudziak, founded the nonprofit Forum Organized to Protect Poles. The group has helped Poles obtain refunds from banks that overcharged them on their mortgages, he says.
As Syed begins to advise his clients' children, he often sees a "total disconnect," he says, in the values of the two generations. Many immigrants, for instance, assume their adult children will care for them at home as they age. "We are not used to the concept of sending parents to retirement homes, even though there are now places that cater to immigrants with ethnic foods and holiday celebrations," Sardana says.
As they get older, his clients wrestle with whether to retire to India or stay in this country. "Five years ago, people used to say they couldn't afford to retire here. But in countries like India and China, where there has been substantial growth and inflation, it's becoming as expensive to retire there as it is here."
The younger generation also may choose careers that seem outlandish to their parents. Immigrants from India are often entrepreneurs - they founded more engineering and technology firms from 1995 and 2005 than immigrants from China, Japan, Taiwan and the United Kingdom combined, according to a study at the University of California, Berkeley. However, Sardana says, "Our clients' kids have been educated in the U.S. system. They don't want to be doctors or entrepreneurs like their parents."
He recounts the story of an Indian-American engineer whose son decided he wanted to work in the film business. "Initially, the father said, 'No, you have to become an engineer,' " Sardana recalls. After his son spent a few years making independent films, however, the father recognized that his son's ambitions weren't all that far-fetched.
Marriages are changing too. Until recently, husbands made most of the financial decisions for these families. "Now, they say, 'I have to talk to my wife before I do this,' " Sardana says. He shows them how to use software to catalog all their assets and accounts. "This way, if something happens to them, their spouses will at least know where to find everything," he says.
Some of his clients have learned the hard way, Sardana says. "I had a client who invested in a lot of startup companies that went under. His wife blamed him, and he realized he should have been more disciplined." Now, if a client's wife isn't on board with an investment, it doesn't happen.
Most of Syed's clients - often Pakistani physicians - want their wealth managed in accordance with Islamic precepts, which prohibit investments in the alcohol, gambling or adult entertainment industries. They also must avoid traditional, interest-bearing investments. Their religious priorities can differ, which makes his practice particularly labor-intensive, but also "challenging and interesting," he says.
Because of the extra work, he keeps his client list to under 100. "I don't take on large accounts unless I'm very comfortable with them. I'm 55 and I like to provide a high level of personal service to my clients," he says.
Rather than investing his clients' assets in mainstream mutual funds, which may encompass some haraam (Arabic for prohibited) industries, Syed uses only specific sector funds, such as energy resources, alternative energy funds, commodities, technology, real estate and utilities. Some families ask him to customize their portfolios further, which takes additional time and due diligence.
The U.S. tax system is especially mysterious to immigrant clients. "A lot of immigrants lose tax deductions because they don't have the guts to declare everything they earn. I have Greek clients, for instance, who never paid taxes in their country because it wasn't enforced," Michalski says.
To such clients, he is fond of pointing out Section 1001, Title 18, of the U.S. Code, which makes lying to the government a crime punishable by fine, imprisonment or both. "Many of my clients tell me that nobody ever showed them this," Michalski says.
They're also intimidated by the thought of walking into the fancy offices of CPA firms, which they think are only for "zillionaires," Michalski says. "You would never even imagine an affluent American asking a neighbor to do his taxes, but this is what my clients do."
As a starting point, Michalski reviews Form 1003, the Uniform Residential Loan Application, with his clients. For those with real estate holdings and few stocks, he'll set up a second meeting to cover the "principles of investing in the stock market, setting up a 401(k) plan for their business or starting custodial accounts for their children," he says. "It's a mission to educate them about the equity markets since they lacked such education in their native countries."
BUSINESS BACK HOME
Since many clients maintain strong family and financial ties to their home countries, planners who serve immigrants must master cross-border estate planning and advise clients about charitable giving overseas. "It's important for us to work with lawyers or CPAs who understand international taxation and income issues," Sardana says.
The importance of getting such specialized help, he says, was underscored when a client was overcharged for setting up a technology fund in India. "The client told us that the fee charged for this one-off request was more than one of the Big Four U.S. accounting firms would require," he says.
In the last decade especially, investments and property holdings have appreciated in value in immigrants' home countries, Sardana says. This often means clients need to take control away from family. "Our clients used to trust someone, like a cousin, to take care of their investments back home, but now these things are expensive, and we need to refer them to professionals in their home countries," he says.
Doing well by immigrant clients from one ethnic group sometimes means new business within another. The good-will Michalski has earned is bringing him referrals through word-of-mouth.
"Many immigrants succeed in accumulating wealth, both as entrepreneurs and as professionals," he says. "I have Polish clients working as construction workers and others who are doctors and computer programmers."
He adds: "Now I'm getting Korean and Chinese clients who have heard about my success with the Eastern Europeans. I don't speak the language, but I'm looking forward to learning some words in Mandarin," he says.
Karen E. Klein, a Los Angeles-based columnist for Bloomberg BusinessWeek, also has written for the Los Angeles Times.