Same-Sex Couple Challenges Create Niche for Financial Advisors Who Provide LGBT Advice
An attorney was vacationing in Mexico with his long-time partner when he had a devastating seizure and died 24 hours later. His partner was facing a lot more than the grief of losing his loved one. The lawyers' family took the house the two had lived in for years and the bereaved partner had to scramble to find clothing receipts just to identify his personal belongings.
Financial advisor Michael Nutt, a senior vice president with Morgan Stanley Smith Barney in New York, who knew the lawyer, says the situation was "horrible" but not all that unusual.
Members of same-sex couples are deprived of the same rights that married Americans take for granted, like community property laws permitting one spouse to transfer half the value of a home to the other without tax consequences. A good advisor can help couples anticipate and cope with these sorts of challenges before it's too late to take action-which is why the LGBT advice space is an inviting one for many wealth managers and other financial planning professionals seeking a niche that's not yet saturated with competitors.
"Advisors are getting into this area feeling it's underserved," says Nutt, who appeared recently on an all-gay panel of wealth advisors at an LGBT forum hosted recently by Deutsche Bank.
"On Wall Street we need more women advisors and more multicultural advisors including Latinos and Asians, and we need more LGBT advisors as well," he told eFinancialCareers.
Clearly, advice givers in this space need not be gay themselves-Nutt's two business partners in the high net worth estate planning and wealth advisory practice he runs in New York are in fact straight married men who moved over from J.P. Morgan Chase a little over five years ago. The unit manages half a billion in assets with 25% or so geared to members of the gay community, including many artists and entertainers. Average client assets are $5 million.
Nutt acknowledges that some gay couples might forge a closer connection to someone who knows their story because it is his (or her) story as well, and yet "There are a number of straight advisors who know more [about this community] than LGBT advisors do," he maintains.
The point here is that more and more banks now seek to be perceived as LGBT allies. The LGBT community is one in which households tend to have both partners in the workforce, yielding higher incomes and fewer children to support leading to more discressionary spending. The LGBT dollar represents a $769 billion in buying power this year, up from $743 billion in 2010, according to MARKETRESEARCH.COM and Witeck-Combs Communications. Perhaps more importantly, a good portion of the LGBT community tends to patronize gay-friendly companies even if their products are pricier or less convenient to access.
From an advice-giver's perspective, there is also the incentive of an insistent demand for financial counseling.,/p>
Same-sex couples are perhaps the best single example of a community with "a true a differentiated need," says Eric Berger, a relationship manager at Credit Suisse Private Banking USA in New York.
"It's challenging in our industry to find that," says Berger, who also sat on the Deutsche Bank panel of LGBT specialists who happened to be gay themselves. Roughly 25% of his own business is comprised of LGBT relationships.
"It's a fantastic opportunity if you are up to the challenge," says Berger. "Because same-sex couples are treated differently under the law, the need for savvy financial planning is paramount,," he says, noting that the big banks are working diligently to make sure their advisors are "LGBT-savvy" and "up to snuff."
What sorts of expertise will be most valued by banks? Estate planning, for one. Clearly, says Berger, the top issues he needs to address with new LGBT clients do not involve asset allocation but "updated wills, asset tilting, and appropriate tax and estate planning vehicles," and often with the help of attorneys and CPAs.
Healthcare proxies and powers of attorney may also be useful in helping same-sex couples to carry out their loved ones' intentions as to shared finances and critical life-or-death decisions when one member of the couple is incapacitated.
One caveat: Don't approach this area because you are following the money trail. Berger warns: Whereas the gay community does have higher levels of discretionary income in certain parts of the country, affluence and income are not synonymous,. Data suggesting that LGBT clients nationwide have higher levels of investible net worth is flawed, the advisor maintains. Moreover, "It is a challenging demographic to approach, given the dynamic legal landscape at both the state and federal levels."
Gay marriage is legal in Iowa, Massachusetts, Connecticut, Vermont, New Hampshire and the District of Columbia. Domestic partners in California are able to hold community property as well, but even in these more liberal territories, federal rules extend no such rights to same sex couples. That means they can't transfer assets between one another without serious tax consequences.
"The federal government looks at same sex couples as business partners," Justin Nelson, co-founder and president of the Washington, D.C.-based National Gay & Lesbian Chamber of Commerce told Registered Rep Magazine recently.
Consider too, that it's not just the largest banks that are eyeing the LGBT market with interest:
Back in January, Northern Trust launched a formal national LGBT and Non-Traditional Family Practice as well.
LGBT clients also represent the fastest-growing part of the practice at UBS' Zinn, Ray and Svatora Group in New York,, according to senior vice president Michael Zinn.
One potentially useful tool for advice-givers looking to approach this field in earnest: The Accredited Domestic Partnership Advisor designation program offered by the College for Financial Planning.