This article originally appeared in the Spring 2013 Issue of Consulting Insights.
As of January 2013, a total of nine U.S. states legally recognize same-sex marriage, with more expected to follow. While the LGBT community has received more rights in recent years, financial planning remains a concern. Same-sex partners face many of the same financial difficulties as other families, with additional challenges when it comes to taxation, retirement, life insurance and more. As LGBT couples gain legal recognition of their marriages, financial services firms have begun making efforts to understand their needs, and, in some cases, have shared their findings with the public and potential clients.
Understanding the Demographics
The research that industry firms have published indicates that the LGBT demographic does indeed have distinct needs and preferences when it comes to financial planning. One of the most comprehensive sets of data comes from Prudential, which published a 20-page report entitled The LGBT Financial Experience. Their nationwide survey found differences within the group, e.g., between gay and lesbian couples, but on the whole some overarching themes emerged. For instance, same-sex couples place a high value on their personal financial independence while feeling less secure in financial planning than the general population. They also perceive low expertise on and attention to their needs from the industry.
While there is clearly an opportunity for advisors, they must have the appropriate training to attract and service LGBT clients. Most of Wells Fargo’s survey respondents said they would prefer to work with an advisor who received training through the Accredited Domestic Partnership Advisor program, which the firm developed to provide financial and retirement planning specifically for LGBT couples. New training can be an important credential for potential clients and help manage their distinct needs more effectively.
Targeted Resources for Unique Challenges
Financial advisors can help with many challenges that same-sex couples face, and Wells Fargo has earned commendations for its training programs. Alternatively, other firms have started offering resources to help the LGBT community create their own financial plans. Three insurers have added content to their public sites as outreach and education for these potential clients.
MassMutual offers a page dedicated to the LGBT community on its public site with detailed literature on relevant financial planning topics. New York Life enhanced its online offerings with a microsite that addresses the main areas of concern for the LGBT community, including Estate Planning, Creating a Safety Net and Retirement Planning. MetLife also added a separate page for the LGBT community that does not provide educational resources as the other two insurance firms do, but instead highlights MetLife’s dedication to all clients.
Each firm identifies many of the same areas where same-sex couples must make sure to be financially prepared, at least until they receive equal benefits. According to their resources, the three main financial issues facing the LGBT community are tax efficiency, leaving a will and guaranteeing a partner their deserved retirement and life insurance benefits.
Without legal recognition, shared finances between same-sex couples can have adverse tax consequences; for example, financial support to one partner or changing a title of property to include both partners can be considered a gift and be taxed as such. Since domestic partners are not automatically entitled to each other’s assets, their wills must specifically designate each other. In addition, federal programs do not recognize same-sex partners for survivor benefits, forcing the couples to rely more heavily on their own savings for retirement.
To date, only a small portion of the firms Corporate Insight tracks have begun publicizing advice or other financial services designed for LGBT couples, but that number is sure to grow as the group continues toward equal rights. The first step is to understand what sets the demographic apart from a financial perspective, then to make sure there are products and services that meet those needs.
More firms are sure to follow in the footsteps of Prudential, Wells Fargo, MassMutual and New York Life, but those first firms to publicize their targeted advice are more likely to drive interest and gain new clients. While offering detailed information and highlighting advisors’ training and expertise is helpful, we may see tailored products in the next few years as financial services for the LGBT community mature.