Are you a multicultural financial advisor? If you have one or more clients who are a different gender, age, religion, race or ethnicity than you, then the answer is yes. But more importantly—are you a multiculturally competent financial advisor?

Fifteen years ago, Robert Laura would have answered this question with an emphatic "of course!" The then-rookie financial advisor was, and still is, an intelligent, sensitive, well-educated and fair-minded guy. Robert was also a social worker in his previous career. Surely his training in the social sciences qualified him as multiculturally competent.

But an early experience showed him that he had a lot to learn. Robert, a married, Catholic-raised, Caucasian man, was eager to grow his book of business. One of his first prospects was a single, Protestant, African-American woman in her early 50s named Donna. Donna wanted help managing her investments, growing her retirement savings and constructing a solid financial plan.

During their initial meeting, Donna disclosed that she was donating 10% of her income to the church. Robert suggested that rather than giving 10% of her income to the church now, Donna could invest the money in a variable universal life insurance policy and donate to the church later. Not only could she better fund her retirement, she could quadruple the amount of money she would give to the church. Robert excitedly presented this recommendation to his prospective client. Donna politely refused, citing a strong religious conviction to give the first 10% of her income to her church.

Today Laura, an RIA and co-founder of the, chuckles at his younger self's well-intentioned naïveté. "I couldn't believe it," Laura says. "It was a win-win. But I didn't understand her approach, and worse, I didn't spend time asking for clarity, so my recommendation deviated from one of her closely held personal and religious beliefs. She didn't become a client."

Laura learned an important lesson from the experierience, which has helped his practice thrive. "Understanding a client's beliefs is more important than understanding how products work," he says.

While Laura's example involved a Caucasian advisor and an African-American client, multicultural competence is not just a black and white issue. Ted Klontz, Ph.D., my father and partner at Klontz Consulting Group, recently worked with an entertainer who was burning through $12,000 a week to pay for lavish meals for his entourage, despite the fact that they were receiving a generous per diem for meals and expenses. The entertainer came from poverty and in the culture of his low-income, close-knit, rural community, one shared what limited abundance was available with everyone else.

Like many people struggling with a sudden money event, the entertainer wasn't psychologically equipped to cope with the rapid increase in wealth and accompanying feelings of guilt and social pressures. Yet his lavish spending was putting the financial welfare of his family at risk. He was also making his employees uncomfortable; they felt obliged to join him for meals and guilty about his generosity.

Without taking his cultural values into consideration, it would have been easy to admonish the entertainer for his overspending, tell him he shouldn't feel guilty for his success and insist that he stop spending so much on others. But by asking questions, seeking to understand and honoring the client's cultural values, my father structured an intervention that included establishing a community center in the client's home town and less frequent but special events for the entertainer's employees. The price tag went from $52,000 per month to $3,000 per month, and everyone was happy.

Beliefs, values, experiences and norms vary significantly, and not just according to ethnic or racial identity. Cultural differences exist according to gender, age, generation, national heritage, religion and spiritual practices, sexual orientation, socioeconomic status and disability status. Within this definition, chances are you belong to one or more cultural groups.

It is impossible to understand every aspect of our own culture, let alone become an expert in the norms of every category of diversity. So some general guidelines are helpful for advisors who want to succeed in an increasingly multicultural world.

The first step in becoming culturally competent is recognizing your own culture. Those who belong to majority groups (i.e., are largest in number and have the most power and influence) typically find this hardest. In our society, majority groups are males, non-disabled individuals and members of the predominant ethnic and religious group, for example.

Many majority group members are infrequently exposed to minority group members and thus may be unaware of how their culture and experiences differ from others. This is not the same challenge for minority group members, who are acutely aware of how their cultural values and norms differ from the majority culture.

In our country, the majority culture tends to value independence, assertiveness, verbal prowess and rationality, while many other cultural groups place greater value on interdependence, subtle communication, listening skills and spiritual orientation. The more we are aware of our own cultural biases and assumptions, the better we can notice those of others.

Before you work with other cultural groups, it helps to do some research on cultural norms. For example, Americans have criticized the Japanese for being too indirect and cryptic in their communication. However, this criticism just reflects multicultural incompetence.

When asked to perform a task, Americans like to receive a specific set of instructions from their boss so they know exactly what is expected. In Japan, if a boss gives detailed instructions to a subordinate, it's like saying "Since you are so incompetent that you can't figure this out for yourself, I'll spell it out for you." It's the subordinate's job to figure out how to deliver what the boss wants. Just as you would learn about the culture of a country to which you were traveling, make an effort to study the cultural norms—especially ethnic and religious—of other groups.

Now that you have a basic understanding of the cultural norms of groups you come in contact with, forget them. One of the biggest mistakes advisors make in multicultural financial advising is making assumptions about another person's culture. When someone is of a different race or speaks with a different accent, this is obviously a cue that cultural issues may be at play. However, many multicultural mistakes arise when an advisor assumes that someone who shares his or her gender, age and race also shares all of the same ethnic heritage or religious values.

An excellent approach to providing multiculturally competent financial advising is to use what mediation practitioners call a "beginner's mind." Approach each client conversation with a vivid curiosity, acting as if you have no idea what the person in front of you believes, values, wants, needs or fears. Ideally, this shouldn't be a stretch because you don't really know.

In addition, what the client tells you that he or she wants may not actually be what he or she wants. Spend time asking questions about how current financial behavior fits with the client's values and goals. Ask if there are any cultural, family, generational or religious variables that might impact the financial advisory process.

All advisors have a multicultural clientele and with some reflection should be able to recall a time when they made a multicultural mistake, such as offering a recommendation that didn't fit a client's beliefs, values or goals. Multiculturally competent financial advising requires a commitment to self-reflection and learning. The process takes practice and is essential to providing good financial advisory services. It directly impacts client welfare as well as an advisor's bottom line.

Dr. Brad Klontz is a financial psychologist, associate professor in personal financial planning
at Kansas State University and co-author of four books on the psychology of money.