How do traditionally trained advisors connect with a market that has been wholly under-served?
by Marcia Mantell, RMAMs. Mantell is the founder and president of Mantell Retirement Consulting, Inc., a retirement business development, marketing & communications, and education company supporting the financial services industry, advisors and their clients. She is author of “What’s the Deal with®… Retirement Planning for Women” and blogs at BoomerRetirementBriefs.com.
Unless you’ve designed your financial advisory business around specific niche markets, you know opportunity comes from any number of different population segments. Offering expert financial planning, retirement, and investment services in markets that are typically underserved can help you build a practice faster, or reinvent and redirect a practice to better fit the needs of prospects in your area.
One market that is often underrepresented, and frequently misunderstood in the financial advisory world, is the LGBTQ community. Individuals and couples who identify as LGBTQ (lesbian, gay, bisexual, transgender, questioning or queer) have found it challenging to find trusted financial professionals or financial advisors who fully understand the differences in their path to financial independence and security. As a result of the important and long-overdue Federal recognition of same-sex marriage, providing financial advice for this niche market is needed more than ever.
Same-Sex Married Couples: Making Up for Lost Time
Many gay couples find they are way behind in setting up an adequate financial household. They have faced situations with financial implications that most opposite-sex couples never have to deal with. Annika Bockius-Suwyn, an Estate Planning and Estate Administrator Attorney at Danger Law, LLC in Newton, Massachusetts1 explains, “Many in the LGBTQ community never get the chance to learn about money from older generations. It is not uncommon for LGBTQ people to lose their parent and family support at a young age, so they lose valuable lessons of financial education at home. They’ve had to create their own ‘found families’ as they move into adulthood.”
These closely-knit found family members are mostly of the same age and often lack financial literacy. Add in that women are often paid less than their male counterparts. This combination can cause serious financial setbacks, especially for two married women. These women often find themselves in a situation of a double financial set-back—both are paid lower wages than males plus they have more financial ground to catch up.
An Aegon Center for Longevity and Retirement survey revealed only 45% of LGBTworkers have a well-developed retirement plan, yet 11% think they will need to generate more than 100% of their current income in retirement. That is a tall order.
Most LGBTQ Individuals Are Saving Less for Retirement
According to the Prudential Financial Wellness survey, only 27% of LGBTQ individuals have an employer-sponsored retirement plan. Furthermore, only 21% have an IRA and only half of this market segment owns any basic banking products. Reaching retirement with a healthy nest egg is critical for every worker, but even more so in the LGBTQ community where many will not have others to rely on in retirement. Many do not have children; others feel they can’t rely on siblings or other family members who object to, or outright reject, their identity. As a result, leaning on family in retirement will not be an option.
“One of the hesitations for saving in a retirement account at work among same-sex married couples is they need to name a beneficiary. If they have decided to keep their personal life personal, there is now a risk of unwanted exposure in the workplace,” Bockius-Suwyn explains.
The implication here is that those in a same-sex marriage have additional planning concerns when deciding how to create their retirement strategies. It’s critical that financial advisors are aware of these sensitive issues and offer suggestions for alternatives. Perhaps an IRA will be a better retirement savings vehicle for clients who are concerned about workplace privacy. While not necessarily as tax-efficient as a 401(k) or 403(b), it is a more confidential option.
Even those who are taking advantage of employer plans and IRAs have saved less than their heterosexual counterparts. The average balances in retirement accounts for LGBTQ individuals is $32,000 less than non-LGBTQ individuals ($126,000 vs. $158,000). While neither balance is going to be adequate for most to have the retirement of their dreams, it’s clear that LGBTQ individuals could benefit from more financial advice.
LGBTQ Women Are Looking for a Trusted Advisor
Longevity concerns for gay women is the same as for non-gay women. The current average life expectancy for a woman who reaches age 65 is about age 88. The probability of living to her mid-90s is 25%. Making sure women are financially prepared for decades of living in retirement is a key benefit financial advisors can offer all women, and LGBTQ women in particular.
More than 40% of LGBTQ women in a Prudential Financial Wellness survey report they lack a trusted advisor; yet, most say they like getting advice from others who are investment experts. Further, 30% reported that they were unsure how to evaluate their financial options and about 25% are not sure where to go to get financial information or advice.
These findings create a hole that a Mack truck could drive through when it comes to making it clear that financial advisors are needed to provide critical advice to LGBTQ women.
Are You Prepared to Welcome Same-Sex Married Women into Your Practice?
How will you respond when a prospect calls and asks if you will see her and her wife to discuss financial planning? Are you genuinely comfortable talking to two women rather than to a man and woman couple? Every advisor needs to decide if they are comfortable to serve LGBTQ couples. If so, you’ll need to make sure you and your practice are truly welcoming.
This requires some new learnings on your part, including areas where you may:
- need to learn how to tailor language, including pronouns and other gender-classifying words;
- review your forms to make sure they don’t say “Husband/Wife” on the various columns;
- change your thinking to be more neutral until you know each couple’s preferences; and,
- work on not presuming and assuming, but rather, on asking more questions.
The bottom line for any advisor who wants to expand their business with the LGBTQ community: You have to move beyond the 1950’s view of the family. There are all kinds of interesting and fascinating families who need the advice and guidance you have to offer. Decide if you are willing to take key steps to truly make your practice LGBTQ friendly.
Several Special Circumstances for Advisors who Work with LGBTQ Clients
On the surface, it appeared as if all wrongs were righted when gay marriage became legal at the Federal level. Unfortunately, nothing is as easy as it seems. Here are 3 specific situations that financial advisors should be keenly aware of when working with LGBTQ clients and prospects:
1 – You’re Fired.
Today, it is shocking that there are 28 states where there are no protections at the workplace for LGBTQ workers. In other words, it is still legal to be fired simply for being gay or transgender. You can imagine how stressful it can be wondering if you’re going to have a job at the end of each day.
Fortunately, most large businesses have rallied against such backward laws and have non-discrimination policies to protect all their workers. 96% of the Fortune 500 companies have put safeguards and inclusive policies in place for their LGBTQ employees.
Regardless of their employer, it is critical for you to ensure that clients have an adequate emergency fund set up and fully funded. It’s often appropriate to establish a 1-to-2-year emergency fund, especially if the worker is supporting a partner or at-home spouse, any children, or aging parents.
2 – Children Cost More.
It costs something north of $250,000 to raise a child to age 18 these days in America. But, for gay and lesbian couples who want to have children and build a family, they might first spend six-figures to adopt a child. The average costs to adopt one child ranges from $35,000 – $40,000. Add in lost wages if the employer doesn’t offer paid leave for adoption or if one parent leaves their job to stay home, it’s easy to see how costs can hit $100,000 per child before you start raising them.
Tapping retirement accounts or taking on debt to start a family is often a necessity. But, it has far-reaching financial consequences that financial advisors can help to rebuild.
3 – Love and Marriage.
Unique to same-sex married couples is an underlying concern that their right to be married could be revoked. That would have damaging effects on these couples, their children, and their futures. For example, if a marriage becomes invalid, how will a spouse get her survivorship benefits?
“We help our same-sex married couples plan for this possibility,” says Bockius-Suwyn. “In our estate planning documents, we keep a ‘Plan B’ section updated in the event something happens to the definition of marriage. Think about how that would upend a retirement plan. One wife has the 401(k) and has named her wife as the sole spouse beneficiary. If their marriage is declared null and void, the beneficiary will be treated as a non-spouse beneficiary and will be required to liquidate the plan assets in 5 years. This is a serious consideration when planning for future income.”
There are also great misunderstandings around common law marriages. Only a few states still recognize common law marriage and they are fraught with nuance and nitty-gritty details.
It’s important that financial advisors who work with same-sex couples understand their marriage situation and team up with a lawyer who specializes in same-sex and common law marriages.
How Financial Advisors Can Become Allies and Advocates
It’s clear that there is a need among the LGBTQ community, and those who are in same-sex marriages, for high-quality, trusted financial advisors who are aware of the unique issues facing these clients. If you want to expand your business to support LGBTQ individuals, you must be knowledgeable, be an ally, be compassionate, and make it known that you are an advisor who is aware of the nuances and special circumstances that LGBTQ individuals face as a daily reality. Here are several steps you can take:
- Reach out to lawyers in your community who specialize in the unique situations of LGBTQ persons. Set up a networking lunch and talk about what lawyers see as gaps for obtaining trusted, reliable investment, financial, and retirement advice.
- Get involved in the Human Rights Campaign, GLAAD (Gay & Lesbian Alliance Against Defamation), or your local PRIDE parade. You can attend a local event, support an upcoming function, or become a sponsor.
- Contact your local PFLAG chapter and invite an educator to help bring your team members up to speed on relevant topics in the LGBTQ community.
- Once you decide to become a supporter of gay and lesbian rights, make sure to let clients and prospects know. Display a LGBTQ-friendly marker on your office door, website, and marketing materials. Something as simple as a rainbow will be a meaningful indicator that you are a trusted advisor.
- If you work for a large broker-dealer, insurance company, or RIA, find out what their policies are for supporting LGTBQ employees, agents, and advisors. Encourage your firm to support the various PRIDE events across the country and to continue to be a vocal business leader for LGBTQ workers and their families.
There is a clear and present need for financial advisors to connect with underserved markets to provide better and more appropriate financial and retirement planning. Are you prepared to open your business to the LGBTQ community? v