The Importance of Building Wealth

Eduardo Tobon:

Hola. I'm Eduardo Tobon. I am the Latino segment head for BMO Commercial Bank, and I'm happy to be back on Markets. Plus. Today I have the privilege of introducing our next episode in our Latino Leader Index 500 series with Adela Cepeda, Independent Corporate Director of BMO Financial Group and Chair of UBS Funds, and Gary Acosta, Co-Founder of Latitude and CEO of the National Association of Hispanic Real Estate Professionals. These two experts gathered at a recent BMO Latino Alliance National Board event to have a candid conversation on building wealth.

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Adela Cepeda:

I'm Adela Cepeda. I was honored to attend NAHREP as part of Latitude and spoke at the NAHREP presentation on Saturday, and the commitment of that membership struck me as extremely powerful. It's a commitment to some of the tenets of what we want to talk about here today, building a business, building wealth, and that has been foundational to you.

Gary Acosta:

It is very core. I tell a story that the members of the organization don't have a casual relationship with NAHREP. It is part of their professional identity, and it creates a very sticky organization, this cohesiveness, this alignment, this optimism that is shared across the board amongst our members.

Adela Cepeda:

And that optimism is, again, with the plan, the vision to create wealth.

Gary Acosta:

Absolutely.

Adela Cepeda:

Again, central to everything you've done. In particular, I think you were foundational to the creation of the Hispanic Wealth Project?

Gary Acosta:

Correct.

Adela Cepeda:

And then promoting those findings, not just in your organization, but in others as well.

Gary Acosta:

That's true.

Adela Cepeda:

Can you tell us a little bit about that, about what led you to that?

Gary Acosta:

So the mission statement of NAHREP is to advance sustainable Hispanic homeownership in America. So we want to see those homeownership rates increase. We want every Latino that has the means and the desire to participate in homeownership to have the opportunity to do so. That's the core mission of the organization. But five or ten years into that experience, we started to recognize that homeownership, while it is a critical milestone and what I describe as the gateway to the middle class, it is not the end game per se. It is a means to something else. It's a means to a better quality of life. It's a means to wealth creation. And so we started to think a little bit beyond just homeownership and think about the end game, which is really prosperity. I joke that Latino immigrants don't come to this country because they love our music or our food or any of those cultural elements.

They come to this country specifically for one purpose, and that is economic opportunity, to live a better life and to create a better life for themselves and their families. So that sort of thinking is what caused us to create the Hispanic Wealth Project, which at the beginning was really just a data repository because there's very little data on Hispanic wealth that's out on a consistent basis. But the more we spent time on that, we started to think about different programmatic activities that we wanted to focus on, and that was the emergence of, I think, what you may be referring to is the NAHREP 10 Principles, which is really the tenets that guide our members about wealth-building principles. And we actually have gone through the process of certifying trainers on those principles that go out to the community beyond just the NAHREP database, so to speak, or membership base, and share those principles with the broader Latino community throughout the country.

Adela Cepeda:

And that's great, and I'm thrilled to hear you speak like that about homeownership because an area that I've been extremely concerned about is increasingly I see articles about young people trying to decide whether they should own homes.

Gary Acosta:

I'll put it to you this way. There has never been a bad time to purchase a home in the United States. And what I mean by that is if you're buying a home because you see it purely as an investment, you're going to flip it in a year or two, then obviously there's been ebbs and flows in the marketplace, and there's been good times to do that and maybe not as good times to do that. But if you're buying a home for the long run to set up roots and to raise a family and to have a vested interest in the community, in the country, there has never been a bad time to purchase a home. So I just scoff at that rhetoric because it isn't the first time that people have said that. People said that in the '70s. Think about-

Adela Cepeda:

A lot of wealth that would have been left there.

Gary Acosta:

Listen, think about listening to that advice back in the '70s when you could buy a house for $30,000 and people thought it was ridiculous.

Adela Cepeda:

When I look at the numbers of wealth by ethnic group, I think that the wealth of white families is around 140,000. You might be more current on this. And then the wealth for Latino families is around 40,000.

Gary Acosta:

That's about right. For median wealth, that's correct.

Adela Cepeda:

Median. And it's a huge gap. And it's what we call the wealth gap that Latinos are trying to fill in. And as I see this literature about should you own a home, should you not, almost 100% of that wealth in the median white family is their homeownership. And if we don't have that, that is just so basic to how we can extract further resources for anything including a business.

Gary Acosta:

Homeowners versus non-homeowners in the Hispanic community have something 30 times the wealth as non-homeowners. It is overwhelming in that regard. So I said it, and I'll say it again, homeownership is the gateway to the middle class for most Americans, especially Latino Americans. So there's an organization called the Urban Institute, a think tank in Washington DC, very reputable, who came out with a study two years ago that said that Latinos will represent 70%, 70% of homeownership gains in the United States over the next 20 years, 70%. So this is not a niche market. This is a huge segment of the overall market and the primary driver of growth in the housing sector. And of course, Priscilla is very much attuned to those data points.

Adela Cepeda:

And as we talk about entrepreneurship and how elemental it is to our community where it's just so common to have within our families someone that just breaks out of what they're doing to do it their own way, to do it under their name. And I know that you're aware through the last programming in San Diego that BMO sponsors the Index 500, which I call the BMO 500, where we prepare a list of the top Latino companies in America now up to 500, and it's so exciting to see. But to a large extent, do you think that our entrepreneurs are more dependent on their businesses as the sole or main part of their wealth?

Gary Acosta:

I think that entrepreneurship and business ownership is in the Latino DNA somehow, some way. It is a natural sort of thing for us to pursue. The data supports that. So Latinos are almost twice as likely as the overall population to have a small business within their household. I think that whether or not it is the primary source of revenue or wealth for those individual families or not, it is a substantial source and probably a substantial source that out indexes other segments of the population. So I've grasped a new talking point, which is homeownership is the gateway to the middle class, but business ownership is the path to prosperity for the Latino community because we really need to get our heads around that.

But let me tell you why it's also especially important. So one of the first things that I did after we started NAHREP was I went to a listening tour and I visited some of the top companies that were servicing the housing market. This is 25 years ago. And I told them all basically the same thing, that there was this tidal wave of Hispanic homebuyers that were coming around the corner and that they needed to prepare for it. They needed to have the right people, they needed to have the right products and services, and they needed to learn how to market to this community effectively. In every one of those meetings, everybody in the room nodded their head in agreement. And in the weeks and months and years that followed, none of those companies did a thing. And it's not because they didn't necessarily believe it or they were bad people. I think it's hard for big companies to move, but I'll tell you when things changed.

They changed when a handful of startup companies that were laser focused on the Hispanic market started to achieve scale. When those companies went from small mom-and-pop companies to large-scale companies that started to take market share from some of these bigger companies, then the conversation about the Latino market changed inside of those companies from more of a this is the right thing for us to do, we want to be good corporate citizens, to a war room conversation where they were discussing, "If we don't figure a way to reach this market, we're going to continue to lose market share, and some of us are going to lose jobs." That's when things started to change. So entrepreneurship, in my view, is the key to closing wealth gaps in America, especially for the Latino population.

Adela Cepeda:

Thank you, Gary. One last question. What unique challenges and opportunities do you see for Latino real estate agents in the current market, and how can they leverage their cultural background to better serve diverse communities?

Gary Acosta:

Well, I think the wind is at the back of real estate professionals who can reach the fastest and largest growing growth segment in the housing space. So they're uniquely positioned for success. I think that one of the things, I think, to your point that we haven't seen proliferate the way we want to see, and that's Hispanic ownership of companies in the real estate sector. I really believe that that's where the next opportunities are. When people ask me what's next for NAHREP, I do talk a lot about NAHREP becoming more of an incubator for the next big thing in the housing space. And there's no reason why the next Zillow, the next Rocket Mortgage, the next Century 21 shouldn't come from the Latino entrepreneurship community. And that's what we want to see happen. Thank you.

Adela Cepeda:

Thanks very much. I want to thank BMO for facilitating this.

Gary Acosta:

Absolutely. Thank you.

Eduardo Tobon:

If you haven't already, be sure to listen to the previous podcasts in our series where we take a deeper dive into how the BMO Index 500 was born and showcase the remarkable achievements of many Latinos and Latinas Disfruten. Enjoy.

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